Ways to Cut the Cost on Life Insurance

November 25th, 2019

To help you get the best life insurance policy that is right for your needs, we have set out our top money saving tips below.

1) Premiums

As is typical with most things, prices vary across different insurers so to ultimately find the best price you must compare across the different providers. To help, Free Price Compare offers a hassle free comparison service so you can not only save money but also time.

2) Select the right policy

“Term” Insurance and “whole of life” assurance are the two main types of life insurance policies.

Generally speaking, term insurance is cheaper than whole of life as it only pays if the unfortunate happens during the term of the cover. In contrast, whole of life gives full cover as it guarantees to pay whenever the policy holder passes away.

Savings are even possible if you are willing to reduce your cover as you get older, from the insurer’s risk perspective, the older you get the higher the risk to the insurer. Hence a reduction in the cover amount is seen favourable in their view.

To make the policy more bespoke, you can request the insurer to pay the compensation as monthly proceeds as appose to one lump sum payment, this may also entitle a smaller premium.

3) Length of Cover

As can be expected, the longer the policy the more likely the chance that the claim will be triggered and therefore higher premiums to compensate the insurer can be expected. So, before getting carried away it is important to work out the length of the insurance cover that you require. In most cases, people get life insurance cover up to the mortgage amount of their house and the length of the same. This allows them to be rest assured, that in the event of their death, their loved ones will have enough funds to pay off the outstanding mortgage.

4) Amount of life cover

As per the length of cover, having a high amount of cover also leads to higher premiums. So intuitively, it’s important to work out the amount of cover you require and the affordability of the premiums.

Moreover, many employers now offer a death-in-service benefit which should not be discarded as an irrelevant part of the employer/employee work contract. In many cases the death in service compensation is four times your basic salary, so this can significantly reduce the amount of life cover your require and hence, reduce the premium for your cover.

5) Young life insurance

As stated above, the longer the life cover policy, the higher the relevant premiums as statically you are more likely to trigger the pay out on the policy. However, when you are young, the chances of death are low and hence it pays to arrange your cover when in your 20s or 30s as appose to when you are in your 40s and 50s.

6) Lifestyle choices

Drinking and smoking excessively is almost a sure fire way of reducing one’s life expectancy, so when getting life insurance quotes you shouldn’t be surprised if the quote is higher due to your lifestyle choices.

If possible, it is advisable to simply stop smoking and/or consume alcohol in moderation. This will not only save you money in purchasing the items but also save you money on your life insurance cover. As a general rule, you can only declare yourself as a non smoker if you haven’t smoked for at least 1 year- this includes nicotine replacement products and e-cigarettes (as they contain nicotine and their health implications are not conclusive).

7) Joint Life Policy

Usually, joint life cover is cheaper than singular life cover but it’s important to note that that policy only covers the first death. Once the survivor passes away, beneficiaries can’t claim unless another policy had been taken out. As you might expect, this is usually much higher given the higher age of the surviving individual.

8) Bespoke extras

Typically life insurance companies offer further add-ons to your policy, but these come at an extra price and you might not need them. The most common extra cover is the critical illness cover, which allows the policy to be triggered once the insured has been diagnosed with a serious illness. Another is terminal illness cover for when the insured’s condition is terminal.

There is also a waiver of premium option, which allows you to waive your premium for the length of the life cover as you are unable to generate an income due to ill health/injury.

9) Tax Implications

Legally, life insurance pay outs are free of capital gains and income tax but the beneficiaries could be liable to IHT or inheritance tax at 40%. However, this tax can be mitigated by writing the policy ‘in trust’. This is a very simple process and the adviser/insurer should be able to offer guidance.

10) Life Insurance- Do I really want it?

As stated above, if you are in employment, your remuneration package might have a death-in-service cover which protects you up to x4 on your basic salary. This cover may give you complete cover or significantly reduce the cover you require from an additional life insurance policy. Furthermore, if you are in a position where you have no dependents or any major financial liabilities, then you may also consider not having or reducing your current cover. This is perfectly reasonable and it is up to you to decide which cover best meets your needs and budget.

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