5 tips to save money on your life insurance premiums

Life Insurance can provide peace of mind and can help to ensure that loved ones are taken care of financially.

IF YOU are young and in good health, you could secure life insurance premiums from as little as 20p-a-day. However, is this the reality?

Extensive research carried out in 2022 by the UK’s largest life insurance broker Reassured concluded that the average cost of life insurance was actually £38.15 a month.

This monthly premium was calculated based on data from 142,576 level term policies sold, with an average cover amount of £151,972.

With inflation now exceeding 10% and many families really feeling the pinch, it has never been more important to save on monthly expenditure such as life insurance premiums.

Here are our top 5 top tips to help you save:

  1. Shop around for quotes

This is arguably the most important top tip in this article. As a result of different underwriting criteria, life insurance quotes can vary significantly between insurers for the same level of cover.

Therefore, it is vital to compare multiple quotes from different providers to ensure you secure the right cover at the best available price.

You could use a comparison website to compare premium prices. This is a quick and easy way of sourcing quotes day or night and usually does not incur a fee. That said, not all insurers will be listed on comparison websites and so you may be missing out on the best quotes.

Another good option is to use an FCA-regulated life insurance broker. A reputable broker will be able to compare a wide range of insurers on your behalf, as well as help you through the lengthy application process, unpicking the jargon.

Advised brokers, as the name suggests, can advise you on which policy they think would best meet your unique needs and they usually charge an admin fee.

Non-advised brokerages, simply take your personal details (age, cover amount, budget, medical history, smoking status) and present all the possible options for you to make the final decision (and do not offer advice). These brokers don’t charge a fee to use their services, instead they earn a commission direct from the insurer for the policy sale.

Whichever method you use, always compare different quotes and never take out the first policy you see. A life insurance policy could last up to 40 years, and so a saving of even a few pence a week could amount to significant amount over the entire term.

  1. Take time to calculate the level of cover you need

As a general rule, the more cover you take out the higher your monthly premium will be. Therefore, it is important to take the time to calculate the level of cover (known as the sum assured) you specifically require both now and in the future.

Common considerations include, your current mortgage debt, family living costs (allowing for future inflation), how many children you have, the age of your children, whether you enjoy any life cover through your employment (such as death in service). 

A good broker will be able to help you calculate your required cover amount if you are struggling.

  1. Consider different policy types

There are a number of different policy types to choose from, each better suited to meeting different aspects of your life.

For example;

  • Decreasing term life insurance – The pay out sum reduces with each passing month, making it ideal for covering a repayment mortgage but not too much else. Cover lasts for a set period (the term), and your loved ones will only receive a pay out if you pass away within this term. As the risk to the insurer reduces over time decreasing term is usually the most cost-effective policy option.
  • Level term life insurance is similar to decreasing term cover however instead of the pay out reducing over time it remains the same (or level) regardless of when you pass away within the term. As a result, the risk to the insurer is higher and therefore premiums tend to be higher. A level term policy would be well suited to covering an interest-only mortgage.
  • Income protection insurance – This policy option is very different in that it can replace your salary whilst you are still around but are unable to work due to injury or illness. It pays a monthly income (up to 70% of your usual salary) until you are able to return to work.
  • Over 50s plans – If aged between 50 – 80 you may want to consider an over 50s plan. Acceptance is guaranteed with no medical questions asked; however, the maximum cover amount is only £20,000. Therefore, these policies are commonly used to cover rising funeral costs or provide an inheritance.
  • Monthly premiums differ depending on the policy type you choose; therefore it is important to take the time to really consider which one best meets your specific needs and available budget.
  1. Consider a joint policy

Many couples take out joint life insurance, which covers both lives simultaneously. The main benefit of a joint policy is that it is approximately 25% cheaper compared to paying two separate premiums, making it a good option for those on a tight budget.

Whilst a joint policy is a cost-effective option is will not be for everyone, as it will only ever provide one pay out (usually on the first death). After which the policy expires leaving the remaining partner without cover.

If you have young children then taking out two separate policies, although more expensive, may be a better option as it could provide two separate pay outs and therefore double the coverage.

  1. Write your policy in trust

Writing your policy in trust could ensure a future pay out avoids 40% inheritance tax and well as bypassing the probate process (ensuring a faster pay out).

Although it is completely free to do, Aegon estimate that only 6% of policyholders utilise this option.

Writing your life insurance in trust detaches it from your estate, meaning it is not subject to 40% inheritance tax on anything over £325,000 (this includes any property, savings and assets) after your passing. Essentially, you sign over the rights of the policy to a trustee to administer on your behalf, much like the executor of a Will.

Whilst a trust will not lower your monthly premiums, it could make your loved one’s £1000s when it comes to a pay out on your policy, maximising your investment.

In conclusion

The last few years living through a global pandemic and now a cost-of-living crisis has further emphasised the importance of provisioning for the future as you never quite know what is around the corner.

Life insurance protection is a cost-effective way of ensuring your loved ones are provisioned for whatever the future may hold, providing reassuring peace of mind and securing the family home.

We hope the above article has helped give you some top tips on how best to save money on your life cover in 2022.

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