If your family would struggle to cope financially after your death, life insurance could prove very valuable. That’s because it pays out a lump sum or regular income if you die within the term.
2. Can I take out life insurance now that I am older?
Most insurers allow you to buy life insurance up until the age of 75.
However, your premium will be higher than a younger person’s as there’s a greater chance of a payout.
If you are aged 50 or over, it could therefore be worth considering a specialist policy for the over 50s.
3. Can I buy life cover if I am already ill?
Our health often deteriorates as we get older, but if you have a pre-existing medical condition, don’t assume you can’t get life insurance.
Just be aware that because there is a higher chance of a claim being made, you will have to pay more for your policy – which means shopping around is even more important.
It could be worth talking to a broker who will be able to advise you on the best policy – you can get free advice from LifeSearch on 0800 170 1963.
4. How much life insurance do I need?
The amount of cover – or sum assured – really depends on your individual circumstances.
If your children have left home and you only have a small mortgage, you won’t need as much cover as someone with a big mortgage and lots of dependants.
Don’t forget to take into account any death-in-service benefit from your employer when you are working out your life insurance needs.
5. Does my age affect the length of the insurance term?
Many people link their life insurance to their mortgage term, or to the ages of their children.
For example, someone with a 10-year-old child might choose a 15-year term to see the child through school and university. Alternatively, if you have a 20-year mortgage, you might opt for a 20-year plan.
So, the older you are when you take out life insurance the shorter the likely term.
6. Should I buy life insurance for my partner?
You can buy a joint life policy but it pays out only on the first death, leaving the survivor without any cover. If the surviving partner then chooses to buy their own life insurance it could be expensive as they will be older and their health could have deteriorated.
7. I am divorced. What happens to my life insurance?
If you took out a joint life insurance policy with your former spouse, it cannot always be divided into two separate plans. You might therefore want to cancel the policy and review your life insurance arrangements.
If you have children with your former spouse, you might want to make some financial provision for the children in the event of your death.
You might also want to take out life insurance if you move in with a new partner.
8. Is the life insurance payout tax-free?
There is no income or capital gains tax to pay on the proceeds of a life insurance policy. However, the money forms part of your estate when you die and so could be liable for inheritance tax.
Luckily, you can easily – and legally – avoid inheritance tax by writing your policy in trust. It’s a relatively simple process and your insurer should be able to give you the necessary forms.
9. Do I need critical illness cover?
Critical illness cover pays out a tax-free lump sum on the diagnosis of one of a list of about 50 specified illnesses.
It is often cheaper to buy a combined critical illness and life insurance policy, but it pays out only once. In other words, if you were diagnosed with a critical illness and made a claim, you would not then receive another payout on death.
10. Can I make changes to the policy?
It’s a good idea to review your life insurance on a regular basis to make sure it is appropriate for your needs. If you then want to change the policy length or the amount of cover, you should contact your insurer.
Some firms allow you to amend your policy – and if the changes coincide with key life events, such as moving home, you might not have to provide any additional medical information.
If your insurer cannot accommodate the changes, you can search for a better deal. Remember, though, that you will be older when you take out the new policy than when you arranged the previous plan, so it could work out more expensive.