Life insurance is being bought online by more and more people, and the number seems to double every two years. It's easy to see why. Life insurance is a simple insurance product, and the prices are lower on the Internet.
Even though life insurance is simple at its core, most websites send their online clients to a phone-based help and advice service staffed by people with a lot of experience. They are your safety net, so if you need a little technical know-how, help is close by.
But when you're shopping online for life insurance, it's always a good idea to have a few Top Tips on hand. They will help you ask the right questions and find the best policy.
- Your life insurance policy should always be "Written in Trust."
This means that if you make a claim, the money goes straight to the person or people you name when you first get the policy. It also keeps your estate from having to pay Inheritance Tax on the money from your policy, which could save your estate up to 40% in taxes.
All you have to do is tell the online broker who is setting up your policy that you want it "Written in Trust" and give the names of the people the life insurance company will pay if a claim is made. Then they will take care of everything for you. The even better news is that this service is always free. So it's a situation where everyone wins, which is rare these days.
- A Reviewable Life Insurance Policy is cheaper in the beginning, but a Guaranteed Policy is a better deal in the long run.
With a "Guaranteed Policy," your insurance company promises that your premium will never go up.
With a "Reviewable Policy," you agree that your insurance company can check the cost of your policy at regular intervals. But don't be fooled—in our experience, a "review" is just another word for a price increase. Who has ever heard of an insurance company not looking for ways to charge you more? Most insurance companies do reviews every 2 to 5 years, but this can vary from company to company. The Key Features Documents that are sent to you before you agree to buy the insurance will tell you when the next review will be.
So, if you compare policies that are otherwise the same, the premiums for a "Reviewable Policy" will always be less than the premiums for a "Guaranteed Policy" in the first few years. After that, the premiums for a "Reviewable Policy" go up until they catch up with the premiums for a "Guaranteed Policy" and pass them.
From what we've seen, the monthly premiums for a Reviewable Policy will be higher than those for a Guaranteed Policy in about 7 to 10 years, and then they will more than double again in the next 10 years. If your budget is tight right now, there's no reason not to choose a Reviewable Policy. After all, your salary may go up in the years to come, which will make things easier. On the other hand, we think a Guaranteed Policy is your best buy if the premiums are affordable.
A side note. Many insurance companies no longer offer "Guaranteed" rates for critical illness insurance policies that are bought on their own. This is because the number of claims has been much higher than they had expected. But you might still be able to find Guaranteed life insurance that also covers critical illness. As we've said, "Guaranteed" rates are especially good deals, and if you can get a quote for a Guaranteed life policy that also covers critical illness, you may have found a great deal.
- Are you thinking about getting a policy for both of you?
Most of the time, a joint life insurance policy is based on the first death. This means that if the policy is still in effect at the time of the first policyholder's death, the policy will pay out. This means the second person is older and doesn't have insurance. Older people may have trouble getting life insurance at a price they can afford, so instead of a Joint Policy, think about getting two separate policies now. Overall, it will cost a little more, but you'll have twice as much protection and twice as much peace of mind.
- Are you getting life insurance? Now is a good time to add Critical Illness coverage.
Do you think you'll ever need Critical Illness Insurance? Yes? Then think about adding it to your life insurance policy right now. Why? This is true for three reasons.
First of all, a policy that covers both life insurance and critical illness will be much cheaper than two separate policies. Second, as we said in the footnote to Tip 2, you may be able to buy a policy that covers both life insurance and critical illness and has a fixed premium. That might be a great deal. Lastly, premiums for critical illness insurance go up quickly as you get older, so the sooner you get it, the less you'll pay for it.
- Don't get Critical Illness cover and Terminal Illness cover mixed up.
Terminal Illness and Critical Illness coverage are very different, so it's important to know the difference.
Terminal illness coverage gives you the lump sum you insured for if a doctor tells you that you have an illness that will kill you within 12 months. Most good life insurance policies include coverage for terminal illness without charging extra. It's kind of like getting money from a policy early, which is nice.
A Critical Illness policy pays out the insured lump sum if you are diagnosed with one of many long-term illnesses, and there are no rules about how long you are expected to live. In fact, with many of the illnesses covered by insurance, you could expect to live for a long time. For example, certain cancers, heart disease, stroke, multiple sclerosis, loss of speech, sight, or hearing, the start of Parkinson's or Alzheimer's disease, third-degree burns, etc. Say you were a 40-year-old engineer who lost his or her sight. A Critical Illness policy would pay out right away, and that money could be very important to you and your family as you go through many years of hard money. If you only had coverage for a terminal illness, you wouldn't get anything.
As you can see, critical illness coverage is much more extensive than simple terminal illness coverage. Because of this, critical illness coverage always costs more than terminal illness coverage.
