Life insurance is typically taken out to provide your family with a lump-sum payout in the event that you should die during the policy’s duration. But how can you reduce the cost of your life insurance?
In this article, we look at the best ways to save money on your life insurance and where you can get free expert advice.
1. Buy it while you’re young
Life insurance will only get more expensive as you get older so our first piece of advice is to buy it while you’re young. If you’re a 20 something we’re sure life insurance isn’t at the top of your to-do list, but trust us, your 40 something self will thank you if you do take out a policy now.
2. Select the right policy
There are a few types of life insurance you can go for, but they largely fall into two categories; Term and Whole of Life.
Term insurance
Term life insurance is cover which has a fixed length, i.e. 20, 25 or 30 years and it’ll often be set up to run alongside a major debt like a mortgage. If you pass away while the policy is active your family will receive a lump sum pay-out. When it comes to term insurance there are two types: level and decreasing.
Level term insurance will pay-out a fixed amount regardless of when you die, so £100,000 of cover will stay the same for the entire term of the policy. Decreasing term on the other hand, reduces each year, similarly to something like a mortgage, with the idea being that the policy will always be enough to pay off the outstanding debt. Decreasing term is cheaper than level term for obvious reasons, so if you’re looking to save some money, it’s one to consider.
Whole of life insurance
A whole of life insurance policy will cover you until the day you die, as long as you keep up with the monthly payments. Unlike term insurance which has a fixed end date, whole of life insurance doesn’t and will continue throughout old age and until your death. Because of the nature of whole of life policies they do tend to be more expensive than term insurance.
3. Set the length correctly
When you’re taking out your life insurance policy, you need to make sure it only runs for the amount of time you need it for. If you, for instance, have a mortgage or other significant debts that might expire in 20 years, then you likely will only need cover for that time period. Equally, if you want to ensure that your family gets a pay-out regardless of when you die, then perhaps choosing a whole of life policy with no fixed end date would be the most suitable.
4. Compare life insurance companies
One of the best ways to bring the cost of life insurance down is to compare providers and there are a couple of ways you can do that. Firstly you could use an online tool such as this or you could speak to an independent life insurance broker. Both will give you a comprehensive comparison of the market but by working with a broker you’ll also get free advice based on your circumstances.
5. Try not to over-insure
It’s tempting when taking out a policy to get the most cover that you can, but just be aware that the more you have the higher your monthly fees will be and the policy needs to be affordable today and in years to come. If your family would be ok with £100,000 then there isn’t really the need to insure for £400,000 for example. Exercise caution and only get what you need.
6. Give up smoking
Finally, a surefire way to reduce the cost of your life insurance is to quit smoking.
