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Trinity's top ten life assurance and protection pointers

Aaron Strutt Image

Trinity Financial has put together ten pointers to help ensure life assurance and protection policies are set-up correctly and policy holders are not paying more than necessary.

In France the banks insist that their customers have appropriate life cover in place before the mortgage is completed. The French lenders want to ensure that the mortgage is be repaid in the event of the mortgage holders death. This used to be common practice in the UK.

1) It is advisable that life policies are taken out separately and not as a joint policy. In the event of a death, a joint policy will simply pay out on the first claim and then stop running. With separate cover there will be two individual payments for each life and you will get twice the amount of cover for a similar premium.

2) Many people are not aware that they are entitled to a non-smokers discounted rate if they have given up smoking for 12 months.  This is the cut-off point where insurers think that statistically you have broken the habit.

After this 12 months period, you can go back to the market and apply as a non-smoker. This will lower your monthly premium. The provider will do a swab saliva test to confirm your non-smoker status and this should take five minutes. A nurse will visit you at home or at a convenient location.

3) The average wife is worth approximately £30,000 a year according to data released by Legal and General.  It is important to insure this valuable member of the family, even if they don't bring in an income.

4) It has been reported that you are four times more likely to have critical illness than die before the age of 65. This makes critical illness cover particularly important as it pays out on approximately 40 medical conditional, rather than life assurance which only pays on death.   Because of the higher levels of risk, critical illness is more expensive than life cover. It is advisable to have some cover rather than no cover. This can also be tailored to your budget.

5) It is vital that life cover is put into the necessary Trust. This Trust insurances that the policy is paid out promptly, rather than suffering delays via probate (no will) if not in Trust. In the event of a claim putting the life cover in Trust will ensure that the cover amount is not subject to inheritance tax and is passed straight to the family.

There is three stages to a trust.  The owner/settlaw of the plan. At least two trustees to administer your wishes and the beneficiary.

6) If you have had your life assurance premium loaded due to a medical condition you can reapply to the market for a cheaper policy once your condition has changed. For example, maybe your BMI was high at the time of application, but one year down the line you are back within the government's recommended BMI limits.

7) Sometimes premiums are loaded or increased because of your family medical history - cancer for example.  Some life assurance application forms ask: “Have any of your natural parents, brothers or sisters, before the 60th birthday, been diagnosed with any medical conditions such as heart disease or cancer?”

It is possible for this premium loading to be reduced after a period of time.  By shopping around it may be possible to be accepted by a provider with more lenient underwriting criteria. Don't accept the first response.

8) There are two types of premium for life insurance policies. One is guaranteed and stays the same through the term of the mortgage and the second is a reviewable premium.

It is important that the insured do not opt for or get stuck with a reviewable premium. The insurer can hike the premium every five years.

Life cover is competitively priced and it is advisable to take it out alongside your first mortgage. The younger you are the lower the premium. It is certainly advisable to take a guaranteed premium as it is fixed for the term of the policy, typically 25 years.

9) The average person lives to the age of 75 and they probably won't use the policy they have been paying into.

The average age of a critical illness claim is 40 and this is typically more likely to pay out for: heart attack, cancer, stroke, MS.

10) Income protection pays out a tax free income in the possible event of an illness or accident. This is important to many families as it ensures the main income generator is safeguarded. It is slightly more expensive but again a limited amount of cover can be taken to suit your budget.

If you would like help to lower your life assurance premiums or to arrange a new policy, call us on 020 7016 0790.

October 22, 2013

As seen in
sunday times telegraph financial times bbc news the express the times
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