Life insurance is essential for your family’s financial security if the worst were to happen to you. However, if you’re living on a tight budget, or struggling with the rising cost of living, there are ways to reduce the cost of your monthly premiums.
Reassured, the UK’s largest life insurance broker, have determined that the average cost of life insurance in the UK is currently £38.15 per month, for a cover amount of £151,972.
However, the amount you pay may differ significantly, depending on your personal circumstances and the type of policy you own.
With budgets being stretched thin due to the cost-of-living crisis and the run up to Christmas, Reassured have provided 5 handy tips to help you reduce the cost of your monthly premiums.
1. Check that your cover amount is still necessary.
It sounds like a simple solution, but it’s one which is often overlooked.
By evaluating your current life insurance, you can establish whether it still meets your needs, or if it’s worth securing a new life insurance policy (with a lower cover amount).
You may have recently experienced positive changes in your life, like recently attaining a mortgage or welcoming a new addition to your family. Alternatively, you may have received some news about a bereavement or loss of employment. In these situations, consider whether your life insurance still reflects your circumstances.
Maybe your reasons for securing life insurance have shifted. You may have originally secured life insurance to cover your young children. But if they’ve grown up, flew the nest and are financially independent, you may wish for your life insurance to only cover your funeral.
New circumstances and motives could impact how much cover you require, and it’s worth reviewing periodically.
While premiums are fixed on active life insurance policies, a new policy could result in a cheaper plan.
2. Consider reducing your current policy term.
By reviewing your reasons for life insurance, you can determine if your cover length also needs to change.
Most life insurance providers offer term-based life insurance and life assurance.
Term-based cover can be either level or decreasing and will last for an agreed period of term. A pay out will only occur if you pass away during this this time.
Life assurance can either be whole of life or over 50s life insurance and lasts until you pass away, guaranteeing a pay out.
Let’s assume you wanted to secure life insurance to cover your mortgage/family home if you pass away. It would be more financially prudent to secure term-based life insurance which covers you for the length of your mortgage term, opposed to a life assurance policy which will last for life.
Like we mentioned in point 1 – check that your cover amount is still necessary.
Term-based life insurance is, on average, cheaper than life assurance. While life assurance guarantees a pay out, term-based insurance only covering a set period results in less risk imposed on the insurer.
3. Factor in any additional cover you may have.
You may have additional cover in place through your employer if you were to pass away while in employment.
Many companies offer a death in service benefit, which pays out a sum to your loved ones if you pass away. Check whether this is something your employer provides when applying for life insurance.
If you needed £100,000 of life insurance with the sole intention of covering your mortgage, and your company would provide your loved ones £50,000 if you were to pass away, do you really need £100,000 cover?
A cost-effective option would be to secure the remaining £50,000 required for this target, ensuring you only have the cover in place that’s needed, while saving money on your monthly premiums. However, this would only be applicable for those securing new cover.
A death in service benefit usually isn’t applicable if you leave your job, so consider this if you’re not staying at your job for the foreseeable future.
Once again, this comes down to checking your cover amount is still necessary.
Considering your savings, pension if applicable, or other forms of passive income is an important step for determining how much cover you truly need and to save money.
4. Consider a joint life insurance policy.
A joint life insurance policy is one which covers two lives simultaneously. This can be ideal for married couples or partners in a long-term relationship, who are on a tight budget.
Instead of two separate applications being completed, you and your partner would only need to complete one. The premium is calculated by the level of risk you both pose as a collective; resulting in only one premium that needs to be paid.
Joint life insurance usually only pays out upon the first death. Therefore, the surviving person would no longer be covered and would require an additional life insurance plan.
This could be a great option for close couples to consider, as you’ll only need to pay one premium (as opposed to two for separate policies). However, it does come with a few caveats.
If one partner is deemed a higher risk by the insurer – this could be due to medical history, smoking status, or occupation – the other partner may be paying more than necessary to compensate.
If additional cover is required after the first partner passes away, the surviving partner could find they’re paying a higher amount than if two separate policies had been secured originally (due to being older and with potentially less favourable health).
If you’re struggling to work out whether two single policies, or a joint policy is a more financially viable option, it’s worth talking to a reputable broker, who can help you make an informed decision.
5. Compare quotes from different insurers.
When securing new life insurance cover, arguably the most important aspect of reducing your life insurance premium is comparing multiple quotes.
As your life insurance premiums are fixed and you’ll be paying them for the foreseeable future, you want to ensure you’re getting the best possible quote for your situation. Even saving a few extra pounds each month could result in a significant saving over the course of the policy term (up to 40 years!)
There are many insurers in the UK and multiple life insurance options, meaning it can be overwhelming looking for the most affordable deal.
Therefore, talking to a life insurance broker or using a comparison website can help secure you the right policy at the best price.
