Having a life insurance policy in place is an important way of making sure your family are secure financially in the event of your death. This is especially true if they would be left with large debts to pay, such as a mortgage, if you're no longer around.
Life insurance payments don’t have to break the bank, so read on for five ways to reduce the cost of your life cover.
1. Stop smoking
One of the biggest factors that insurers consider when calculating premiums is whether the person smokes. No two ways about it: if you smoke, then your life insurance will cost more.
Smoking is the root cause of a lot of serious diseases, such as bronchitis, heart disease, and several types of cancer. Smokers tend to die younger and so pose more risk to insurers, which is reflected in their premiums.
According to market data collected by MoneySuperMarket
, the premiums for a smoker are, on average, 56% higher than for a non-smoker.
Cutting down the number of cigarettes that you smoke or giving up entirely can help improve your health and reduce the risk of disease. For example, studies show
that giving up smoking for one year can reduce your risk of cardiovascular disease by half.
By giving up smoking, you can reduce your risk of disease and in doing so, reduce your health insurance premiums.
2. Change your unhealthy lifestyle habits
Your lifestyle choices can make a huge impact on the cost of your life insurance policy. Since insurers calculate the premiums based on your risk of dying, factors like the type of job you do, any unhealthy habits you may have, and how risky your hobbies are will all affect how much you pay.
Obviously, how dangerous your job is will play a role in determining your premiums. Working on an oil rig is clearly riskier than working in an office, for example. However, while your job is a factor in calculating your risk, your health plays a much more important role - so don’t hand in your notice just yet!
Typically, lifestyle habits like drinking and being overweight are some of the main factors considered when calculating your risk level. If you want to save money, it might be worth making an effort to improve your health.
You don’t have to worry about reporting that Christmas sherry to your insurers, but your premiums will likely rise if you exceed the government’s recommended alcohol intake limit of 14 units per week. If you want to keep your insurance costs down, make sure to drink in moderation.
Losing weight can also be a good way to reduce the cost of your insurance payments, as being overweight increases your risk of numerous health disorders, such as a heart attack or type 2 diabetes.
If you want to bring down the cost of your premiums, you can make some lifestyle changes and look after your health.
3. Consider re-broking your cover if your health has improved
If you do already have life cover and want to reduce your monthly payments, you could consider re-broking your cover.
If your lifestyle has improved since the time that you took your life cover policy, perhaps in the ways described above, you may find that you’re able to get a cheaper deal with another provider.
For example, if you now exercise more and smoke less, your risk of cardiovascular disease may be significantly reduced. Because of this lowered risk to the insurer, you may be able to get lower premiums than you did before.
Be warned though that, as you get older, your risks of developing certain diseases may have increased. If your health has worsened since you took out the policy, it is unlikely that you’ll find a cheaper deal.
Speak to a financial adviser about the possibility of finding cheaper cover, and whether the policy you have is the right one for you.
4. Consider other types of policies than Level Term Assurance
It may be worth considering different types of cover other than the typical Level Term Assurance. Two of the main alternatives to this are Family Income Benefit and Decreasing Term Assurance.
Family Income Benefit
A typical life cover policy pays a lump sum to your loved ones when you die. However, with Family Income Benefit, they will instead receive a regular income for a set period that you decide.
For example, you may set up your policy so that it provides an income of £2,000 per month for twenty years. If you died ten years after taking out the policy, the beneficiaries would receive that sum for the remaining ten years. If you died within the first year, they would receive £20,000 for 19 years or more.
This type of cover can be cheaper than Level Term Assurance because the insurer is less likely to pay out a large sum and, if they do, it won’t be in one go. This lower risk translates into a lower cost to you.
Decreasing Term Assurance
When you take out Decreasing Term Assurance, the payout reduces over time throughout the policy period. This is a popular type of cover with people who have a repayment mortgage, as the cover is designed to reduce in line with your mortgage balance.
For example, you might take out £100,000 to cover a 20-year term. If you died in the first few months, the policy would pay the full amount. If you were to die in the 19th year of the policy, you would receive a much lower amount. Since the amount your insurer may need to pay out decreases as time goes on, this policy is generally cheaper than other types.
5. Consider seeing a financial adviser to find the best deal for you
Many people buy life insurance from their mortgage provider or the bank that they save with, but this approach could cost you.
Different insurers offer different rates for life cover, and the cost of protection from your bank or mortgage lender may not be the most competitive.
Talking to a financial adviser can be useful if you want to save money on your life insurance payments. An adviser can navigate the market and secure you the best deal from a wide range of providers.
So, don’t simply take out the first life cover policy that you’re offered – speak to an expert who can find the right cover for you at the right price.
If you need to protect your loved ones, or you want to review the cost of your life cover, please get in touch by calling us on 03300 583 859 to find out more.