Buyers' Guide - Life Insurance

Life insurance often isn't a top priority in stretched times, but dying without cover could leave you loved ones stranded. So how do you work out if you should buy life insurance and – if so - where do you start? Let Moneywise help with our Buyers' Guide.

Not everyone needs life insurance, but if you have dependents that rely on your income it's must have cover.

Life policies pay a lump sum if you die. Most people buy it when they take out a joint mortgage, but it can also help with the costs of raising a family or paying an inheritance tax bill.

If you're a single parent and paid child support, or divorced and get maintenance, you can even buy a policy to pay out if your ex dies.

Term insurance lasts for a fixed period. You can buy level insurance that pays a flat rate or cheaper decreasing cover that shrinks in line with your mortgage.

If you'll need the policy to help raise children, family income benefit can save you money. There's no lump sum, as it pays a monthly income instead.

But if you want your life insurance to cover an inheritance tax bill, or just to leave a lump sum for your loved ones, you're better off with whole of life insurance.

It will pay out whenever you die – but it's a lot more expensive.

Lots of factors affect the amount you pay, from your age to the type of job you do.

Work out how much cover you need so you're not under-insured. And if you're not sure what to do or which type of policy to buy, take advice from a specialist broker.

Finally, ask your insurer to write your policy in trust. This will ensure the money goes straight to your loved ones and they won't have to pay inheritance tax.