How could life insurance go wrong?
Life insurance can support loved ones, pay off debt or inheritance tax bills.
However, it can also become a huge expense for the policyholder, particularly if you overlook the small print.
In this guide, we reveal what to watch out for when buying life insurance. For a general introduction to life insurance, read our guide.
Looking to buy life insurance?
If you decide you need advice, make sure you consult an independent life insurance broker.
Which? Financial Services can refer you to an impartial, no-obligation third-party advice service to provide you with the best life insurance or mortgage insurance policy tailored to your individual needs.
Find out more about the life insurance referral service at Which? Financial Services.
What are 'low-start' life insurance policies?
Watch out for 'low-start' policies. If you use a price comparison site to find life insurance, you might find these policies come out top on cost.
What you might not realise, though, is that the monthly premium increases throughout the term of the policy.
What may be a very cheap quote in the early years could cost you much more over the whole term of the policy than taking out the same cover under a term life insurance policy, under which your monthly premiums will stay the same.
Can I have two life insurance policies?
It's entirely possible to have multiple life insurance policies, and this is a crucial decision to make if you're in a couple.
Couples can buy a joint policy that covers both lives or can have one policy each. Joint-life policies pay out on either the first partner's death or the second.
- First-death policies are often used to provide a lump sum for your family if you or your partner dies – to cover mortgage repayments, for example.
- Second-death policies can be used to cover an anticipated inheritance tax bill.
And yet, if you're looking for cover for you and your spouse, two single-life policies may offer much better value than a joint-life one.
What are reviewable life insurance policies?
If a quote seems unusually low, check if it's a reviewable policy.
Rather than the monthly premium staying the same (as would happen with a regular 'guaranteed' policy), the premium is only guaranteed for the first few years (often the first five or 10 years), at which time it is repriced.
As prices rise a lot as you get older, you may find that reviewable premiums become unaffordable in later life.
- Find out more: how to write life insurance in trust
Warning: health issues when buying life insurance
If you withhold any information about your health, your policy could be invalid and might not pay out. If you have a pre-existing medical condition, you should still be able to get life cover, but it may be harder to find and cost more.
The Insurance Surgery is a specialist broker that can help find insurance for people with pre-existing medical conditions.
If you have a specific illness, try contacting the relevant charity for advice on life insurance. For example, Cancer Research UK offers information about life insurance for cancer sufferers.
Get life insurance and protection advice
Which? Financial Services Limited, part of the Which? Group, can refer you to our trusted partner to help you find insurance for your needs. Find out more at Which? Financial Services.