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http://www.gccihome.com/life-insurance/
Life Insurance
By Rachel Lane, Fri Dec 9th
Contemplating what may happen to your wife (or husband) andchildren if you die is not likely to be a thought you wish tocontemplate. However, avoiding the issue may make life moredifficult for your family after your death. Life insurance looks set to make a comeback in the UK, after aperiod of neglect by consumers who were simply occupied withaffording a home. The stabilising of the UK house market hasmade many consumers take a broader view to their personalfinances. LifeSearch (a life insurance broker), in the September issue ofMoney Observer, highlighted a few common mistakes people makewhen buying life insurance: * Believing life insurance is relevant to everyone Lifeinsurance is only relevant to people who have financialdependents. If you have no financial dependents, it might bemore appropriate to consider income protection or criticalillness insurance. * Paying too much for life insurance According to MoneyObserver, research for Sainsbury’s Bank life insurance revealedthat many people take life insurance policies from theirmortgage providers and as a result could be paying too much. * Opting to buy joint life insurance policies instead of singlelife insurance policies The advice to married couples is toavoid taking out joint life insurance policies which pay outwhen the first spouse dies over the term of the policy, but noton the second. Single policies could provide additional cover bypaying just an extra £3-4 a month. * Missing out on a trust The Tax Man can claim up
to 40% of yourlife insurance payout as inheritance tax. According to MoneyObserver, those with assets totalling £275,000 or more(including a house) are especially prone to tax inspection.Writing your policy in trust is a way to avoid this and as atrust does not have to go through probate, beneficiaries of thepolicy will receive the payment without delay.* Only insuring the main earner Whilst it is important to coverthe main breadwinner, by neglecting to additionally insure thehousewife or househusband may result in extra child care costs.Family income benefit (FIB) may be an appropriate policy to putin place. * Opting for a lump sum over income If your dependents arelikely to require an income, then buying a policy that pays outa lump sum is a mistake. Many people invest lump sums for anincome, but when they invest it, they have to pay tax. Familyincome benefit provides a larger payout – tax free, though themajority of banks and building societies do not offer FIB, soask an Independent Financial Advisor for recommendations. * Not proving full medical records or detailing comprehensivemedical history Failure to disclose a complete picture of yourhealth, no matter how trivial, could invalidate a claim later on. There’s no excuse for not conducting your own homework, as thereis an abundance of information available online. Sites such asmoneynet, provide not only price comparison research ondifference life insurance products, they also offer downloadableconsumer product guides. Lowermybills proffers a similar servicestateside. Resources:
http://www.moneynet.co.uk/insurance/life-assurance/index.shtml (Prince
comparisons) http://www.moneynet.co.uk/life-insurance-guide/index.shtml(Life
insurance guide) http://www.lowermybills.com/
About the author:Rachel writes for the personal finance blog Cashzilla.
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