Common Life Insurance Mistakes Uk. Page 2

* Missing out on a trust

The Tax Man can claim up to 40% of your life insurance payout as inheritance tax. According to Money Observer, those with assets totalling £275,000 or more (including a house) are especially prone to tax inspection. Writing your policy in trust is a way to avoid this and as a trust does not have to go through probate, beneficiaries of the policy will receive the payment without delay.

* Only insuring the main earner

Whilst it is important to cover the main breadwinner, by neglecting to additionally insure the housewife or househusband may result in extra child care costs. Family income benefit (FIB) may be an appropriate policy to put in place.

* Opting for a lump sum over income

If your dependents are likely to require an income, then buying a policy that pays out a lump sum is a mistake. Many people invest lump sums ( secured loans ) for an income, but when they invest it, they have to pay tax. Family income benefit provides a larger payout - tax free, though the majority of banks and building societies do not offer FIB, so ask an Independent Financial Advisor for recommendations.

* Not proving full medical records or detailing comprehensive medical history

Failure to disclose a complete picture of your health, no matter how trivial, could invalidate a claim later on.

There's no excuse for not conducting your own homework, as there ( life insurance ) is an abundance of information available online. Sites such as moneynet, provide not only price comparison research on difference life insurance products, they also offer downloadable consumer product guides. Lowermybills.com proffers a similar service stateside.