Life insurance is a great way of being able to take care of your family financially in the event of your death. It allows for your family to have some form of financial security in such a difficult time. A primary reason for you to have life insurance is to allow for any debts you have to be paid off and to provide financial support to any dependants that you may have by replacing some or all of your income should you die.

Although not a particularly nice subject, if you have a young family or if you are the sole bread winner then it is imperative that you have life insurance. If you think that it can be costly then it is worth looking for discounted life insurance thoroughly. Life insurance works by paying premiums to a company, normally on a monthly or an annual basis. The insurance company will then pay out a previously agreed amount, commonly referred to as the sum assured, should you die at some point in the life of the policy.

Trying to find discounted life insurance is difficult as life insurance premiums are dependent upon a number of factors, these being the sum assured and the length of your policy, along with factors based on your lifestyle such as your age, occupation, gender, health and if you are a smoker. Therefore the best way to keep your costs down is to purchase life insurance as young as possible, improve your lifestyle and take more exercise and if you are really serious, give up smoking! You may also find that purchasing your insurance online will also save you money as it effectively cuts out the middle ma, however make sure you fully understand the terms and the type of policy you choose first.

There are however many ways in which you can get yourself a better deal with regards to your life insurance, including purchasing separate policies for you and your partner, instead of having a joint life, first death policy. Buying individual policies for you both means that you will get two lots of payouts and therefore twice the cover.

This will cost you around a few pounds a month more but will give you much more security, as although a joint policy will save money during the time that you are paying for it, you must remember that it will leave the second policyholder having to then get a new life insurance policy at an affordable premium in old age. This will work out to be considerably more expensive. An individual policy will also make life easier with the dreaded inheritance tax.

Life insurance policy pay outs are tax free but they can also form part of your estate and will therefore be predisposed to Inheritance Tax (IHT). One way that you can avoid IHT is if you place your policy in trust, which means that any payout will be paid directly to your love ones, and can therefore avoid the taxman.

Having your policy written in trust will means that should your dependents need to make a claim that the money will go directly to the person that you have nominated and can avoid your estate paying inheritance tax. Although this may not give you discounted life insurance initially it means that more of the money is received by those who need it and not taken away by the taxman.

david thomson is chief executive of bestdealinsurance an independent specialist broker dedicated to providing their clients with the best deal on their life insurance, critical illness cover and home and motor insurance.

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