When it comes to financial commitments, buying life insurance could cost you more than it should. There are several ways to get cheap life insurance – which we’ll discuss in this article as well as the types of cover available. Let’s take a look at how it all works…
How does life insurance work?
Life insurance is designed to provide your loved ones with financial support in the event of your death. As a standard, life insurance pays out a lump sum when you die. This payout can be used to help your family with costs such as:
- Living expenses
- Household bills
- Paying off outstanding debts
- Mortgage repayments
- Funeral costs
There are two main types of life insurance – whole life insurance (also known as life assurance) & term life insurance.
Whole life insurance lasts for the rest of your life, right up until you die. It provides your family with a cash lump sum to ensure they can cope financially without your support. Whole life cover usually costs more than term, however, your family is assured of a pay-out no matter when you die.
Term life insurance works differently as it has an expiry date known as the policy term. Your loved ones will only receive a pay-out if you die within this time. Despite this, term life policies are one of the cheapest types of life insurance, ideal for temporary protection.
How much does life insurance cover cost?
Once you’ve taken out a life policy you pay premiums to your insurance provider each month. When you apply for cover your provider will ask you a few questions regarding your health, lifestyle, and medical history as well as the type of cover you want to purchase.
They will then provide you with a quote – which is an estimate of how much you pay each month for premiums. Ultimately the cost of your policy depends on several factors such as your age, health, and occupation. Here are a few ways you can get cheap premiums for life insurance…
Consider buying a term life policy
As we mentioned earlier, term life policies are normally much cheaper than buying whole life cover. While it doesn’t provide permanent cover, term life insurance is useful for covering large payments, like mortgages, which your family may struggle to pay alone.
There are two levels of term life cover that can work out cheaper over time:
- Level term – This type of cover ensures that your premium costs remain the same throughout the policy term. The pay-out amount also retains its value over time.
- Decreasing term – Ideal for helping your family cover repayments on a mortgage. Each month the pay-out value decreases as you make payments toward your mortgage.
Opt for fixed-premiums
Cover types like whole or level term life insurance provide fixed premiums. This means you’ll pay the same for cover each month even as you get older or develop health conditions. With these types of cover, it’s best to take out cover when you are young to lock in cheaper premium rates.
Lead a healthier lifestyle
Living a healthy lifestyle can help to boost your life expectancy, ultimately making the cost of life insurance much cheaper. In most cases, insurers will ask you whether you are a smoker when you apply for cover. When it comes to life insurance, smokers pay significantly more than non-smokers as they are deemed a health risk.
If you happen to be a smoker, it’s best to quit as soon as possible to help lower your premiums. Some insurers may reduce the cost of your cover once you have stayed smoke-free for 12 months or so.
Avoid buying more cover than needed
Buyers can often make the mistake of over-insuring which results in spending more money on covers that their family doesn’t need. Even if you already have an idea of how much cover you think you need, it’s best to make a further assessment of your family’s finances.
Think of how your death would impact your family’s financial situation as well as what compliments they would be left to pay off. If you’re still unsure about how much cover your family will need, talk to a life insurance advisor today.