Many people avoid taking out life insurance protection because their household budget is already really tight.
After all, life insurance only pays out to loved ones if you were to die during the policy term. So, you could be paying a monthly fee for 20+ years and the family never benefit from your investment.
But if you were to pass away without the necessary cover in place, you leave your loved ones unprotected.
Think about it:
- Could your family afford to keep paying the mortgage?
- Would they be able to pay off your outstanding debt?
- How would they fund your funeral? (Average cost £4,271 – SunLife)
- Would they be able to meet daily living costs?
It’s highly likely that if you were no longer around, your loss of income would place financial strain on your loved ones, highlighting the importance of having adequate life insurance in place.
The good news is, there are ways to keep the monthly cost of your life insurance to a minimum.
According to research, over 47% of people have no idea how much life insurance costs.
We asked award-winning life insurance broker Reassured, to talk us through their 5 top tips for saving money on life insurance.
1. Only take out the cover you need
When arranging your life insurance, it can be tempting to take out the maximum amount of cover to provide your family with the largest possible pay out.
However, the larger the sum assured, the more you will pay in premiums each month.
To avoid paying for more cover than you actually need, it is important to consider what aspects of your life you are looking to protect.
For example, if you were looking to avoid your loved ones from having to meet future mortgage repayments, you would choose a cover amount to clear your mortgage balance.
By only taking out enough cover to protect the necessary assets you can avoid paying for unnecessary coverage.
2. Consider a joint policy
Paying for two single life insurance policies may be unaffordable within your current budget; however, you could save money by considering a joint policy.
A joint life insurance policy offers protection for two people simultaneously, so that if one partner were to die, the surviving partner would receive a pay out.
On average you could save around 25% – 30% if you were to select a joint policy for the same level of cover.
However, it is important to note that once a pay out has been made the policy expires and the surviving partner would be left unprotected and needing to arrange new cover at an older age, leading to higher premiums.
Equally, if both partners were to die together, only one sum assured would be paid. This may not be a significant enough amount to cover outstanding debts for both of you, or to support your children now both parents are no longer present.
So, whilst a joint policy can save you money, it is important to consider whether this type of policy will offer you the protection you need.
3. Take out protection while you’re young
Insurers calculate the cost of your monthly premiums based on the risk you pose to them having to make a pay out.
It can be assumed that the older you are, the higher the risk you are to the insurer. As you age, your life expectancy decreases, and you become more susceptible to certain medical conditions.
As a result, the younger you are when you arrange your life insurance cover, the cheaper your monthly premiums will be.
Therefore, to ensure you pay as little as possible on a monthly basis, you should arrange your life insurance cover as soon as possible.
4. Go with a specialist insurer
Generally speaking, taking out a life insurance policy with a specialist will cost more.
However, taking out a policy with a specialist could save you money if you suffer with a medical condition, partake in risky activities or have a dangerous profession, for example being in the armed forces.
In these instances, going with a specialist could save you money.
With a standard insurer, your premiums are likely to be loaded (increased) to account for the specialist underwriting required, and the increased risk you pose.
But specialist insurers deal specifically with impaired cases and therefore, can offer preferable rates.
So, if you suffer medically or have other high-risk factors, it can be beneficial to approach a specialist insurer for a cost-effective policy.
5. Compare quotes
Life insurance quotes differ significantly between insurers, as they employ different underwriting processes.
This means, that you could save yourself a significant amount of money if you compare multiple quotes.
Ultimately, there are 3 ways to carry out this process.
You could carry out the comparison independently, contacting each individual insurer and obtaining multiple quotes.
This process can be extremely time consuming and as a result, the number of insurers you compare is likely to be small.
You could use a price comparison website to compare multiple insurers on your behalf.
This is much less time-consuming than carrying out the research yourself and will allow you to compare a larger set of insurers.
However, the panel compared by these websites may still not be large enough to get you the best possible deal and it will also not help you understand the technical jargon (something many people struggle with when arranging life cover).
The third and final option is to use an FCA registered life insurance broker.
A broker will source quotes from a large number of insurers and will explain them to you, helping you to fully understand everything.
There are two types of broker; advised and non-advised.
An advised broker will source the quotes on your behalf and then advise you on the best solution to suit your needs. There is usually a fee attached to this service.
A non-advised broker will source quotes on your behalf and then provide you with all the information you need to make an informed decision for yourself.
This service is free as commission is claimed from the insurer and it could save you a huge amount of money by comparing quotes on your behalf to ensure you find the best type of cover to suit your needs but at the best price.
Time to start saving
So, as you can see there are many steps you can take to keep your monthly life insurance premiums to a minimum.
- Only take out the level of cover you really need
- Take out life insurance as young as possible, (lock in those low premiums)
- Consider a joint policy rather than two singles
- Use a specialist insurer where applicable
- Use a broker to compare multiple quotes.