It’s easy to buy life insurance – there are hundreds of firms out there eager to sell you a policy.
Banks, building societies, insurance brokers, financial advisers, mortgage brokers, websites and even your local supermarket will have range of deals. Ensuring you have a genuine product which will deliver the goods is another matter entirely.
It is essential you are not sold the wrong policy so it is important to have a clear idea of your goals before looking for a policy as well as just comparing cheap life insurance quotes.
While you can go direct to an insurer to take out a policy, or go via a broker or adviser, its best to ensure both the provider and seller of the policy are legitimate. You can check out their credentials with the Financial Services Authority (FSA). Only use companies on its register. This means they are regulated and have met certain standards.
Life insurance pitfalls and how to avoid them
- Failing to review current policy
It is essential to regularly review your current insurance policy to make sure you are not paying over the odds or are underinsured.Personal changes such as children leaving home, getting a pay rise, taking up a daring new hobby or falling ill could signal it’s time to switch policies. Also wider changes, such as economic conditions, could affect how well your policy is working.
Life insurance prices have fallen considerably over the past few years, so anyone with an old policy could well be paying too much. Surveys show that one in three people have no life insurance and a further third failed to review their policy in the last five years. This means they could be underinsured.
Shop around, seek advice from independent financial advisers, check out price comparison websites and make sure you are getting good value for money with your current policy. If not – move.
- Always read the small print
As with all contracts – failing to read every detail of a policy, including the small print, could have dire consequences.Don’t just assume a sum paid out will cover all costs in the event of a death – there could be a clause at the bottom of the policy which says otherwise. For example, often life insurance policies guarantee costs of funerals at the rate they cost at the time the policy was taken out, plus any inflation.
However, more recently, costs have tended to increase much faster than inflation leaving dependents with a bigger bill to pay out for the funeral. Checking the small print will ensure you know which costs are guaranteed and which might not be.
It is important to provide the insurance company with as much detail as possible when taking out a policy. Failure to do so means that cover will be lost but this will only emerge when it comes to making a claim.Many people do not disclose having received treatments, current medical conditions, or forthcoming tests. Equally, many do not admit to how much they smoke or drink.
Potential policyholders often assume insurance companies gain access to full medical records. But this is a misconception as insurers only do this if a response means they require further information. It is worth checking brokers and financial advisers acting as intermediaries between you and an insurance firm disclose the full information required.
- Costs of life insurance – what affects the price?
Firstly, you could save piles of cash on your premiums by giving up smoking. This is one of the factors that will be taken into consideration when a policy is being drawn up.A person’s occupation will also affect cost. A bungee-jumping instructor would find premiums slightly higher than a librarian, for instance.
Age, gender and your general health also affect the cost of a policy.