Sunday Express – Level Term Insurance protection with details of Torquil Clark's deal
By Martin Lewis
It is as important as it is unpleasant. An estimated one in 20 adults dies while they have a child who is financially dependent on them. Along with the emotional devastation, families have to cope with the potentially dire financial consequences.
Level-term life insurance is the cheapest way to protect your family.
Level-term insurance guarantees to pay a fixed, cash lump sum if the policyholder dies within a set period. Don’t confuse it with decreasing term insurance, bought to cover repayment mortgages, or whole-of-life insurance which is an investment-based policy.
Buying level-term insurance is a case of the cheaper the better – providing the insurer is reputable. There is no investment element because the payout is fixed and there is no argument over whether someone is dead.
The cost of a policy increases with the size of the payout and the length of the term. The payment should be enough to cover likely debts and give dependants a reasonable standard of living.
Couples may also need to buy cover for a non-working spouse, especially when children are young, because, if they died, the main earner may need to stop working.
A rough rule of thumb for either parent is 10 times the highest earner’s income. Be sure to buy a policy where the premiums are fixed rather than reviewable.
A policy covering children should last until they finish full-time education. For a partner, the term needs to continue until the wage earner reaches pensionable age.
Use a broker to find the cheapest policy but note that some pass on to you a proportion of the commissions they earn, while others do not.
Occasionally, different brokers get different commission for different policies, so it is always worth checking quotes.
Some brokers are all execution-only: they find the cheapest price but don’t give advice. Such help can be useful for those with health issues or potential inheritance tax liabilities who may need to write the policy in trust to cut tax. In this case, TQ Direct has the cheapest advisory service – it rebates 40 per cent of its commission as cashback.