10 ways to save money on life insurance
It is no overstatement that life insurance could probably be one of the most significant purchases that you ever make. This insurance policy could well determine a significant part of your families future after you die. If you have chosen the right type of plan, you will be safe in the knowledge that your family will be able to financially support themselves in the years to come after your death. Conversely if you choose the wrong plan or do not get around to having one at all, you could leave your family struggling to pay off your debts in order to stay in your house even just to pay for your funeral.
Due to the fact that death is by its very nature a difficult topic to think about, many of us end up putting off our decision on a life insurance plan until it is either too late or too expensive to take one out. Many people don't consider the fact that the sooner you take out a life insurance plan, the cheaper it will be and the larger the payout will be. This means that by putting it off, you could be costing yourself and your family a lot of money.
Even for those people who have decided that they would like to take out a life insurance policy, it can still be a difficult decision to make. The main reason for this is the fact that there are so many life insurance policies out there. The different types of plans range from completely extensive cover to cover that is just intended to pay off debts such as mortgages in the event of your death.
In This Guide:
- Compare life insurance deals
- Find a policy that suits your needs
- Choose the right term
- Insure the right amount
- Buy your life insurance earlier
- Don't smoke
- Think about taking out a joint policy
- Be aware of additional extras
- Sidestep tax
- Is life insurance necessary for you?
Compare life insurance deals
The first thing that you should do when considering taking out a life insurance policy is shop around to see what deals are on offer. Just like making any purchase it is important that you try and establish whether or not you are going to get the best possible value on your deal.
Here on our website we offer a free and impartial life insurance quotes. It only takes a few seconds and you can quickly compare all the premiums that are suitable to you. This means that you can make an informed decision when taking out a life insurance plan.
Find a policy that suits your needs
The two main forms of life insurance are whole of life insurance and term insurance.
Term insurance is normally offered at a lower price than whole of life. This is because it only lasts for an agreed upon amount of time. This means that your insurer will not pay out if you die after the period ends.
Whole of life insurance on the other hand is the most expensive form of insurance. This is because it guarantees a payout should you die at any point.
Each one of these types comes in various different forms. To find out more check out our guide on the different types of life insurance.
Choose the right term
If you are taking out a term life insurance plan, then it is important to consider how long you would like the agreed term to be. The longer the term that you choose, the more expensive the payments will be.
When deciding you should consider what exactly it is that you want from this plan. If you are using it to help your dependents payoff a mortgage, then perhaps choose a longer term. If you only want the plan to be active whilst your children are still young, then maybe a shorter term could work.
Insure the right amount
It is important to remember that the more that you want an insurer to payout on your life insurance, the higher you will have to pay on your premiums. If your dependents could do comfortably with £300,000, then don't take out a policy worth £500,000.
Buy your life insurance earlier
Life insurance prices will go up as you get older. This is because the longer your insurance company expects you to live, the lower the chances of them paying out. For this reason it is wise to start thinking about life insurance whilst you are in your 20s and 30s, as opposed to taking out life insurance in your 50s.
Insurance companies base your premiums on how healthy your general lifestyle is. This means that if you are a smoker you will be charged considerably more to take out a life insurance policy than someone who is not. If you want to save money on life insurance, then quitting smoking is an excellent place to start.
Think about taking out a joint policy
Many couples take out joint life insurance policies because the rates are much cheaper. The reason for this is that these policies work on a first to die basis. This means that whichever partner dies first will be covered by the policy and the other will receive the payment.
It is important to remember when considering this type of policy that the remaining partner may want to take out a new policy once this one ends. If this is the case, then they will probably have to pay a lot more because of their increased age.
Be aware of additional extras
Many insurance companies attempt to sell add-ons to their life insurance policies or increase costs due to mitigating factors. One of the most common of these is critical illness. If you have a critical illness, then you are likely to pay much more for a life insurance so many policies offer additional cover for things like this. Many of these can be useful but you should think long and hard about which ones you opt for.
Life insurance is not subject to income tax but can be affected by inheritance tax. The best way to sidestep this is to have your insurance policy "in trust". This is simple to do and can be done by everyone. There are no reasons not to do this.
Is life insurance necessary for you?
If you are in work, you may be able to claim a "death in service" sum. This normally gives out a certain amount of cash in the case of your death whilst still working for the company. If you are eligible for this, you may have no need for life insurance so it is worth checking with your insurer.