How Much Does Life Insurance Cost
Last updated: 02/02/2023 | Estimated Reading Time: 6 minutes
We all want to make sure our loved ones can lead happy and fulfilling lives in the event of our absence. But to do so, it’s vital that the cost of life insurance policies is understood and manageable so that the premiums can be paid on a regular basis.
But how much does life insurance cost? And how can you ensure you have the right kind of coverage while keeping your premiums as low as possible? Keep on reading to find the best life insurance policy for your specific needs.
When calculating the average life insurance cost, UK providers will work out a monthly premium. But before doing this, you’ll need to consider the length of the policy you need, the payouts you’d like your beneficiaries to receive, and your own financial circumstances.
As a general rule for the cost of life insurance, the higher the risk you’re considered to be, the higher your premiums will rise. But what are these factors that go into deciding your life insurance?
Everyone’s circumstances are different, and no two life insurance policy premiums are ever the same. However, if you can understand the things that may affect your premium, you’ll be more prepared.
Below are some of the most important factors that an insurer will consider. Think of these as a blueprint that’ll be used as an insurance calculator to decide upon your life insurance costs.
Knowing the cost of your life insurance policy begins with finding the right policy for your needs. Generally speaking, you’ll encounter the following types of coverage.
Level Term Life Insurance: If you choose a level term policy, then both your premium and the payout are fixed throughout the term. These are the most straightforward fixed term policies, but it's important to remember that they may need to be adjusted should your situation change.
Decreasing Term Life Insurance: Decreasing policies have premiums that stay the same while the payout decreases. Generally, these kinds of policies are used to mirror certain obligations like mortgages, so you will pay a premium relative to the amount you owe.
Whole-Of-Life Insurance: This kind of policy continues to run until the end of your life. As long as you continue to pay your premiums, you are covered and will receive a payout when you die. As a payout is almost always guaranteed, the amount you receive tends to be lower than that of a fixed-term policy. Whole of life cover offers different kinds of cover - over 50s plans or whole of life insurance. Both of these types of cover will last for the remainder of your life. Guaranteed over 50s plans don't require you to provide medical information during your application, and all UK residents aged 50 to 85 will be accepted. Whole of life insurance will require medical information during the application process in order to underwrite the policy.
Joint Life Insurance: Typically cheaper than two separate single policies, joint life insurance provides a lump sum to the other person listed on the policy if one of you should pass away. This could be a family member, a spouse, or even a business partner.
Family Income Benefit Life Insurance: These policies don’t pay out a lump sum, offering beneficiaries a regular monthly tax-free income instead. You decide on a monthly amount and a policy term, and those payouts will last from your death up until the end of the term.
While ‘health’ is a relatively broad term, it can be one of the biggest deciding factors for an insurance calculator to decide your premium costs. This term can range from factors like existing health problems and your age to your BMI (Body Mass Index) and height.
Your family medical history can also play an integral part in the calculation of your premium. For example, if a grandparent and a parent of yours have previously been diagnosed with a severe illness or condition, it may be taken into consideration.
Your overall lifestyle will also play a role in your premium. People who smoke or drink above-average amounts of alcohol will be more likely to pay a higher premium than people who don’t smoke or drink.
The following may also play a part in determining your premium:
Your job (some jobs are deemed riskier than other professions)
Your hobbies and interests (if they are deemed extreme or dangerous in any way)
The length of your policy (a factor in the overall cost of premium payments)
The above list isn’t exhaustive, and there are several other things that may come into play before a final premium is calculated. What matters most is that you’re open and honest with all of the information you provide, as failure to do so may void any future claims.
Now you’re aware of the variables a life insurance provider takes into account, it’s time to cross-reference them with your own needs. Try to factor the following into your final decision:
Your overall cost of living
Which policy suits your needs best
The size of the policy payout
Your own personal savings
Areas of your lifestyle that may affect the policy
Variables like holidays, child schooling, cars, and other costs
Generally, the aim of your life insurance policy should be to provide your loved ones with the same amount of cash income they’ll miss out on when you pass or help with things like funeral and mortgage payments.
Using the above variables as a life insurance calculator to determine your premium can work both ways. Here are 5 ways you can keep those premium calculations lower:
Pick the right policy
Whole-of-life insurance may look good on paper, but if you’re simply after cover for a set duration, a standard term policy is more cost-effective.
Look further into a joint policy
It can be a cheaper life insurance option compared to two standalone policies. However, keep in mind that the surviving person listed on a joint policy will cease to be covered after a payout in the event of a death.
Get coverage while you’re young
As your age can affect your premiums, getting life insurance at a younger age can potentially lower the calculated amount you’ll be expected to pay monthly.
Avoid unnecessary policy additions
Get confirmation about what your chosen policy covers and what it doesn’t. Many policies come with additional extras in exchange for an increased premium. If you don’t need it, avoid it!
Change your lifestyle
Life insurance policies inspire some self-reflection. This could be a wake-up call to eat healthier, exercise more, and quit cigarettes and drinking. Not only will you feel better, but your premiums will be lower too.
As you can see, there’s no universal answer to the average life insurance cost UK providers will quote for you. But if you can take the factors above into consideration before deciding on the right policy for you, the policy you do choose will provide you with the right coverage for the things that matter most in your life, and at a price that’s doable.