Additional Life Insurance Cover Options
Many of the best Life Insurance policies will have additional benefits above and beyond offering a payout on the policyholder’s death. These may be included as standard or offered for an additional premium.
It may seem natural to assume that the ‘best’ policy has the widest range of such additional cover areas, but consider what it is that you actually need and want.
Paying for more cover than you need is not the way to find the best Life Insurance, but some of the cover areas to think about include:
Life Insurance with Critical Illness Cover
Most Life Insurance policies will offer Critical Illness Insurance as an add-on. If you choose this cover, it will increase the price of your premium; however, this is likely to be a better choice in terms of price than taking out Life Insurance plus a separate critical illness cover (CIC) policy.
If you add CIC to Life Insurance, the main thing to be aware of is whether you’re buying an independent policy or an integrated one.
With an integrated policy there can be only one payout, meaning that – should you make a successful critical illness claim for the full sum assured – there will be no further payout from the Life Insurance after you die.
Independent critical illness cover allows the Life Insurance element of the policy to continue after a successful critical illness claim.
Terminal Illness Cover
Terminal illness cover is usually a standard feature of Life Insurance policies, allowing for a payout to be made before the policyholder’s death if they’re diagnosed with a terminal condition (having less than 12 months to live).
What Are The Best Life Insurance Premiums?
Generally, guaranteed Life Insurance premiums – where the monthly sum you pay doesn’t change through the life of the policy – are seen as ‘better’ than reviewable Life Insurance premiums.
This is because the insurer can’t change the amount they charge you
Reviewable premiums may be cheaper at the outset of the policy, but could prove significantly more expensive in the longer term as insurers are free to raise premiums over time.
This may happen if, for example, the provider experiences higher claim levels than it had anticipated, or if a major change in interest rates increases its cost base.
Waiver of Premium
This option can mean that, if you find yourself in unfortunate circumstances, your Life Insurance policy remains in place without you having to continue to make premium payments; this may be, for example, if you can’t work because you’ve become seriously ill.
Policies can come with an enormous range of flexible options that can seem great to cope with changing, unpredictable circumstances. But you also need to remember that the more flexibility you build into a product, the more you’re likely to pay in premiums.
Some common options include:
- Guaranteed insurability
Allows you to increase your level of cover without a further medical assessment
- Benefit indexation
The level of your potential payout will increase in line with inflation
- Renewable term Life Insurance
Gives the option to renew at the end of the policy without a further medical assessment
- Convertible term Life Insurance
Can be turned into a whole of life policy without a further medical assessment
- Renewable and convertible hybrid Life Insurance
A term policy with the potential for renewal and/or to be turned into Whole of Life cover
Is it Best to Write Life Insurance Into Trust?
It’s often best to write a Life Insurance policy into trust, but there are times when it may not be needed.
If you’re married and taking out a joint Life Insurance policy, for example, the payout usually goes directly to the remaining policyholder (your husband / wife / civil partner), so a writing your joint Life Insurance policy into trust isn’t usually needed.
However, if you were both to die at the same time, or the joint life policy is written on a second life basis, then writing the policy into trust would be of benefit. Writing your Life Insurance policy in trust costs nothing and can cut delays with probate, so it’s often worth it.
A discretionary trust is probably the best answer for joint Life Insurance policies, as these can be specifically designed to pay out to the second partner on request, if they survive at least 30 days after the first death occurs.