If you’ve decided to take out some form of life insurance to ensure your family’s financial security, there are certain things you can do to keep the cost down. Here are some simple ways of reducing the cost of your insurance – without compromising the security of your family or yourself.
Check existing policies
Look closely at any existing insurance policies before you start anything new:
- You could find you have more cover than you think
- You may be able to increase the existing policy more cheaply than starting a new one
- Check company benefits for you or your partner. Firms sometimes provide ‘Death in Service’ or Medical Insurance for their staff. You may be doubling up on cover that you already have!
Insurance companies will consider you lower risk if you take out cover when you are young. Every year that you delay taking out insurance, the cost will increase slightly.
The following figures are the cost of £200,000 worth of life insurance for 25 years:
- Apply age 25 – £6.43 per month
- Apply age 30 – £8.60 per month
- Apply age 35 – £11.60 per month
- Apply age 40 – £17.09 per month
Health and age tend to go hand in hand. As our age goes up, our health deteriorates. As you can see from the above examples, age increases alone do not have a major impact on cost. It is health that is the major concern to insurers.
It is human nature to start to think about insurance only when you start to have health worries. This would be disastrous for your pockets. As soon as you no longer have a clean bill of health, insurers will hike your monthly premiums or even reject your application (as they consider you an unacceptably high risk).
It is therefore very important to take out insurance while you’re in good health.
Insurance for smokers
A 30 year old female smoker would typically pay around 50% more for insurance than a non-smoker.
If this is an impetus to give up smoking, please bear in mind that insurance companies will only consider you a ‘non-smoker’ if you have not used any nicotine products for 12 months!
Permanently control the insurance cost
Make sure you take out a policy that has ‘guaranteed premiums’. This means that once the policy is up and running the payments are guaranteed never to increase.
Some policies with ‘reviewable premiums’ will seem cheaper at the outset, but insurers can increase the payments on the ‘policy review’ (typically every five years). You could suddenly find that the cost is too high for your budget.
It is very important to set up your insurance correctly. You need to make sure that you have the correct type of contract, over the right time period, and obviously the most cost efficient – you can save £100s per year simply by going with the cheapest insurance provider.
If possible, you should sit down with an Independent Financial Adviser to discuss your insurance needs. Most IFAs will not charge you a fee for an introductory meeting. Check out our guide on how to find the right IFA to suit your needs – and your budget.