Life insurance, which pays out to your dependants when you die, is at its cheapest ever. You can buy policies for as little as £5 a month.
The cheapest and most common form of life cover is “term insurance”, which guarantees to pay out if you die within a given term agreed at the outset. This can be anything from a few years to several decades. If you survive to the end of the term, the policy expires. On a level term policy, the benefit paid on death remains the same throughout the term. With increasing term insurance, sometimes known as indexed insurance, the payout rises in line with inflation, although premiums may also go up. With decreasing term policies, the benefit payable on death falls each year until it is zero by the end of the term. This is often used for repayment mortgages, where the value of your debt falls over the term.
Some life policies include Critical Illness cover. Others offer Critical Ilness as an optional extra.
Insurers have been fine tuning prices in what has become a very competitive market. Several have cut prices on both the life and critical illness covers.
If you are a higher rate taxpayer, since April 6, you have been able to buy life insurance called Pension Term Assurance. You get tax relief on premiums, so as more insurers launch these products, they become more popular.With Pension Term Assurance, you cannot include or add on Critical Illness insurance, so for this cover need a separate policy.