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Andrew Merricks, head of investments at Brighton-based financial adviser Skerritt Consultants, warns that it is very short-sighted of people not to have Life Assurance and/or Critical Illness Insurance as he insists that life has two main risks - either living too long and dying too soon. "It's absolutely crucial to have some cover in place – particularly if you've got a young family," he says. "These days you need to build your own little welfare state because no one else is going to do it for you."
Matt Morris at LifeSearch says now is the ideal time to buy such policies as there are some very competitive premiums around due to the fierce vying for business within the industry. "The cost of life cover has fallen – dropping about 40 per cent in five years. It has never been cheaper," he adds. "The critical illness industry paid out on 84 per cent of claims in 2006 – up from 81 per cent the previous year."
Always check what insurance cover you already have before you take out any more. Do you already have investment policies or does your employment pension fund give you any cover?
The best way to calculate how much cover you need is to work out how much you would need to provide the same standard of living over a year and then times it by 25 years. The minimum amount needed should pay off any outstanding debt and provide a lump sum for all your dependants.
Getting the best deals
When choosing your policy it is essential that you read the guide that many insurers have of the conditions and illnesses that they cover. It will list everything and should be very clear and easy to understand. You will also want to see the documentation of the key features of the policy which will include all benefits and exclusions.
When someone takes on the responsibility of a mortgage they are usually advised to take out critical illness protection but should shop around and not just take the first policy offered.
If you start paying these premiums when you are younger they are considerably cheaper unlike if it is left until you are older when cover increases quite markedly.
Insurance premiums can also be cut by stopping smoking cigarettes. Fiona Jackson, head of protection at Co-operative Insurance says "Giving up smoking can save people a significant amount of money as well as hopefully bringing a longer and better quality of life,"
If you stop smoking you can knock as much as a third off life, critical illness and income protection insurance premiums because the evidence that we now have proves that smoking can cause serious illness and exacerbates any other existing medical conditions.
If your circumstances change you may have to alter your policy.
Never think that once you have bought your policy that you can just carry on with your life and forget about it. Always be very aware of the cover you have and be sure that if for any reason your circumstances change, or, are going to change your policy must accommodate these changes. Obvious examples are changing jobs, or do you intend to have more children; regularly consider anything that may increase your costs to live and will need to be covered if you are unable to work.