We are currently in the midst of a cost-of-living crisis in the UK with high inflation squeezing peoples’ finances. This pressure is also being experienced in other parts of the world.
At times like this it is normal for families to explore ways in which they can make savings, scaling back on their expenditure. Paying your monthly life insurance premium may be a regular expense you consider stopping. Afterall your loved ones’ may never have to make a claim on your policy.
Whilst stopping paying your life insurance premiums may seem like a good way of cutting back on your outgoings, it could leave those who rely on you financially in a vulnerable position.
If you were no longer around to provide could your family afford the mortgage repayments, what about meeting rising living costs, university fees and paying household bills?
Life insurance provides an essential safety blanket, protecting our loved ones’ financial future in a worst-case scenario. Therefore, if you have a partner and/or young children a better option may be to explore ways in which you can reduce the cost of your premiums and maximise your selfless investment.
As a result, we asked leading life insurance broker Reassured to detail their top 5 money savings tips…
Calculate the level of cover you need
When arranging life insurance cover, it can be tempting to take out the maximum level of cover to provide your family with the largest possible cash pay out.
Whilst this may seem like a good idea, it is important to realise that the greater your cover amount (known as the sum assured), the higher your premiums will be.
As a result, it usually makes financial sense to take the time and accurately calculate the level of cover you to actually require. Consider your remaining mortgage debt, living costs, utility bills, any personal debt, the cost of a funeral, any inheritance you may want to leave behind.
Another great way to reduce your cover amount is to offset it with any death in service benefit you may receive through your employer. (This is usually three times your annual salary).
By only taking out the cover you need, means you will not be paying over the odds for unnecessary protection.
Consider joint life insurance
If your budget is tight then it is a good idea to consider a joint life insurance policy.
Joint cover is approximately 25% cheaper compared with paying for two separate individual policies. What’s more, you will only need to fill out a single application.
Whilst you can save money by taking out a joint policy it is important to understand that it will only ever provide one pay out (usually on the first death). Thereafter the policy expires leaving the surviving partner without cover.
In contrast, if you were to take out two single policies your family could benefit from two pay outs. However, obviously this means paying two separate monthly premiums too.
In summary joint cover can be a good option if your budget is tight, however if money allows two separate policies offers twice the coverage and is usually the better choice.
Take out a policy whilst you’re still young
Life insurance providers calculate the cost of premiums based on the level of risk you pose. Put another way, the greater the likelihood of a claim, the higher your premiums will be.
As a result, your age at the point of application is one of (if not) the most influential factors in determining cost. The younger you are, the cheaper your cover because statistically there is less chance of a claim.
As we age, our life expectancy obviously decreases, and you become more susceptible to certain medical conditions. Your smoking status and medical history are also key factors to consider.
To lock in a super-low premium for decades to come it is best to take out life insurance in early adulthood if possible. That said, most people only consider life insurance after a significant life event such as having a child, buying their first property, or unfortunately losing a loved one.
Why not be proactive and seize the day, securing your future and the future of your loved ones.
Consider writing your life insurance in trust
This tip will not lower your monthly life insurance premiums; however, it will maximise a future pay out to benefit your dependants.
Writing your life insurance in trust detaches the proceeds from your estate and therefore the pay out is not subject to 40% inheritance tax (above the £325,000 threshold). You transfer the rights of the policy to a trustee/s to administer on your behalf after you are gone, much like the executor of a Will.
Another key benefit is that because the proceeds do not form part of your estate your loved ones’ will not need to wait for probate to be granted before the funds can be released – meaning a faster pay out.
Writing your policy is trust does not cost you a penny either and most insurers offer this feature. Despite this it is estimated that less than 10% of policyholders utilise this option. Be part of the minority and maximise your selfless investment.
Compare multiple quotes (from different insurers)
In order to save money on your life insurance, the most important thing you can do is compare quotes from multiple insurers. Why? Because the price of cover can vary wildly between providers. Do not take your first quote as there will likely be a much cheaper alternative.
Remember, a life insurance policy can last up to 40 years and so even a small saving each month could equate to a sizeable sum over the lifetime of the policy.
If you know the policy type you require then using a reputable comparison website is a good option, (although be aware certain insurers will be excluded from their quote comparison).
If you require more support, using an FCA-regulated life insurance broker is a great option, as they can answer any questions you have and guide you through the application process.
Brokers such as Reassured Ltd can compare quotes from the leading insurers and small specialists completely free of charge.
During these difficult economic times many of us are looking to make savings where possible. However, if the last 4 years has taught us anything (COVID-19 pandemic) it is that we never know what is around the corner and having life insurance protection in place could one day be invaluable to provision for your loved ones.
We hope this article has given you some useful money saving tips.