How to save money on life insurance is a complicated question in that underwriters determine premium rates based on all of the personal information they have on you as an individual. Any health conditions, or the type of career you’re in, can increase or decrease your premiums for a given type of cover, for example. But that’s not to say that when you see your quote increase after adding these details that you should simply accept this and go for that insurer.
Don’t settle
A bit of grafting goes a long way when it comes to choosing insurance policies. My first tip is to shop around, do your research and better still, go and see an expert. All underwriters see things differently, so it’s definitely worth seeing how they compare and going with the lowest quote.
Beauty is in the eye of the broker
When you approach insurance providers directly as an individual, there’s little incentive for them to be competitive in the quote they provide you with. When you see an insurance broker/independent advisor on the other hand, the providers are essentially competing against each other to win the ‘job’ from the broker, and ultimately you as the client. In my experience, going to a broker can save you up to 20% on monthly premiums as well as ensuring you have the right policies for your individual circumstances. So tip number two, is make sure that you see an expert because it could save you money.
Full disclosure
Thirdly and probably most importantly, it’s not worth withholding information in order to decrease your quoted premium. The most common reason for providers not paying out when claims are made, is on grounds of non-disclosure. When this happens, you could be paying your monthly premium for a policy that won’t even cover you when it’s needed. Bit of a waste of money really?
How you will be as cost effective as possible depends on your main motivation for taking out life insurance. But here are two examples of how you can reduce the price of your premiums through level term and decreasing term policies.
Life insurance to cover specific costs
If taking out life insurance for parental purposes, such as ensuring that your children get an education, you can opt for your pay out to be made on a monthly basis, as opposed to a lump sum. This is called Family Income Benefit.
With a lump sum, your insurer will always have to pay out the same amount regardless of when you pass away. When paying monthly on the other hand (for example up until your child turns 21 and is out of education) how much they have to pay will decrease for every year that you live. This helps your child and guardian to manage the finances they inherit from you and is a way for you to ensure that the funds are used for education. Taking out term insurance like this involves paying for a policy to cover a specific period of time (that is, if you die within the policy’s period). This term could range from any amount of time, but is typically between 5 and 40 years in length.
Life insurance to cover your mortgage
Similarly, if for repayment mortgage purposes, decreasing life insurance is the cheapest option. This will ensure that your mortgage amount is covered until your mortgage is paid off. The reason this is a cheaper option is that the amount that your insurer has to pay in the case of a claim, decreases for every year that you live (because the mortgage balance is decreasing). Decreasing term policies are useful if you have debts/responsibilities that are decreasing with time, such as your mortgage.
With all of these options, the longer you live the less your insurer will be paying out, hence providers charge lower premiums.
Like almost all things in life, you get what you pay for. But that doesn’t mean you can’t find yourself a cost effective policy. What’s most important, is that you get cover for what you need at a premium that you can afford to pay.
If you’d like to find out more about life insurance, pay Daniel himself or another member of the team a visit at our London offices, or get in touch with one of our insurance advisors online today.