Life insurance quotes made simple

Term or permanent: the question that decides everything else

Almost every other life insurance decision follows from this one, and it is usually presented as a philosophical argument when it is a practical one.

Term insurance covers a set number of years and pays only if you die within them. It is inexpensive because most policies never pay out. Permanent insurance is designed to last your whole life and accumulates a cash value inside the contract, which is why it costs several times more for the same death benefit.

The practical question is how long the need lasts. A need that ends - a mortgage, the years until children are independent, the span of a working income - is a term need. A need that does not end, such as final expenses or leaving something behind regardless of when you die, is where permanent coverage genuinely earns its place.

How much cover, and the calculation that answers it

The rules of thumb - a multiple of income, a round number that sounds sensible - are guesses. The calculation that actually answers it takes about ten minutes and two lists.

The first list is what would be needed: the mortgage and other debts that would survive you, the income your household relies on and for how many more years, childcare, education, and final expenses. The second list is what would already arrive: existing policies, employer coverage, savings, and any survivor benefits.

The gap between the two lists is the amount you need to insure. Most people have never worked it out, and the answer is usually further from their assumption in both directions than they expect.

How long the term should run

Ten, twenty and thirty years are the common lengths, and each fits a different situation rather than being better or worse.

The useful way to choose is to ask when the need ends - when the mortgage is paid, when the youngest child finishes education, when retirement income takes over - and buy to that point rather than to a round number.

One caution: buying the shortest term because it quoted cheapest is the mistake that shows up later, because your health at renewal is not the health you have now.

What underwriting actually assesses

Underwriting is the process of deciding whether to offer coverage and on what terms. It is also the reason two insurers can look at identical facts and reach different conclusions.

Insurers generally review your medical history, current health, family history, prescription record, driving record, occupation and certain activities. What matters is rarely the label of a condition - it is severity, how long ago, whether it is controlled, and whether anything is still being investigated.

Carrier appetite varies enormously for the same condition. A decision from one insurer is one insurer's opinion, not a verdict, and this is the single most useful thing to know if you have a health history.

Riders worth asking about by name

A rider modifies the policy. Some add genuinely valuable protection for little cost and are easy to miss because nobody volunteers them.

• Conversion - lets you exchange a term policy for permanent coverage without proving your health again. It costs little or nothing to have and its deadline is the thing nobody watches
• Waiver of premium - keeps the policy in force if you become disabled under the contract's definition, and that definition is the whole thing
• Accelerated death benefit - access to part of the benefit on a qualifying terminal or chronic illness, frequently included as standard
• Child rider - modest coverage on children, usually inexpensive, sometimes convertible later

The beneficiary decision people get wrong

The beneficiary form on the policy generally controls who receives the money, and it overrides your will. That surprises people, and it is the reason life insurance proceeds sometimes go to an ex-spouse named a decade earlier.

Name a contingent beneficiary as well as a primary one, review it after any marriage, divorce, birth or death, and be careful about naming a minor directly - that usually creates a legal process rather than avoiding one.

Tell someone the policy exists. Benefits go unclaimed because nobody knew there was anything to claim.

What buying actually involves

An application, a health questionnaire, usually authorisation for the insurer to review medical and prescription records, and in some cases a brief medical exam. Simplified and accelerated underwriting paths exist and are increasingly common, particularly at lower coverage amounts.

Answer everything accurately. An inaccurate answer discovered later is the one thing that can genuinely undermine a claim, and the questions are not traps - they are the basis of the contract.

The review nobody schedules

Life insurance is bought once and then forgotten, which is a problem because the thing it is sized against keeps changing. The gap you calculated at thirty is not the gap you have at forty-five.

The events worth triggering a review are the obvious ones and one that is not: marriage, a child, a divorce, a house move or remortgage, a significant change in income, the death of anyone named on the policy, and starting or leaving a business. The one people miss is leaving a job, because employer coverage usually ends with the employment and rarely gets replaced.

The review itself is short. Confirm the amount still matches the gap, confirm the beneficiaries are still the people you would choose, confirm the policy is still in force, and confirm someone knows it exists. That is most of the value.

Two policies, or one

Couples frequently buy identical policies because it feels equitable. It usually is not the right structure, because the financial consequence of losing each partner is rarely the same.

Size each policy to its own gap. A lower-earning partner who provides childcare may need more cover than a naive income comparison suggests, because that work would have to be paid for. A joint first-death policy pays once and then ends, which leaves the survivor uninsured at an older age - two single policies generally pay twice and can be adjusted independently.

Where the policy documents should live

A benefit that nobody knows to claim is not protection. Policies go unclaimed every year because the person who bought them was the only person who knew they existed.

Keep the policy number, the insurer's name and the agent's contact details somewhere a beneficiary would actually look, and tell at least one person where that is. A sealed envelope in a safe deposit box that only you can open is a common and self-defeating arrangement.