1. Consider an income policy instead of a lump sum
Most people know that life cover pays out a lump sum if you die. But far less know that you can buy cover that pays a regular tax free income instead of a lump sum. It’s official name is Family Income Benefit and is often cheaper than the more common Level Term lump sum payout option. So why would an income be better than a lump sum?
Many people who take out a life insurance policy simply want to provide an income for their family to replace the earnings lost if they died prematurely. But many policies are bought with a lump sum benefit requiring the surviving family to find a suitable savings or investment vehicle to generate an ongoing income. In addition, the interest generated from a lump sum is taxable whereas the income from a family income benefit policy is paid tax free.
For many people not used to managing large amounts of money, suddenly having to find the right savings account or investment can prove an additional burden at an already distressing time. This is where Family Income Benefit can offer the best of both worlds.
2. Consider a reducing policy for mortgage life cover
One of the most common reasons for needing life insurance is to protect a mortgage loan. The type of mortgage you have will largely dictate what form of life insurance you need but this is often one of two types of term life insurance.
If you have an interest only mortgage then you will need level cover as the mortgage debt will remain constant unless you increase or reduce the mortgage loan. However, those with a capital and interest mortgage can opt for a decreasing term policy where the cover reduces in line with the reducing mortgage loan. As the cover reduces over time so does the risk to the insurance company making this type of life insurance cheaper than the level term option.
So if you have a capital and interest mortgage with a level term life insurance policy and only need to cover the mortgage amount, you could save money by switching to a reducing policy. The downside to this is that you will lose any surplus cover provided by a level policy as the mortgage loan reduces but the level insurance benefit stays the same.
3. Stop smoking
All insurance is based on risk and so to cut the cost you have to cut the risk. With life insurance, the risk is based upon your chances of dieing whilst the policy is in force. Insurers measure the risk by assessing your health and medical history.
Anything that increases your risk of dieing prematurely will increase your premiums. These risk factors can include your current state of health, family history, hazardous occupation or hobbies but most commonly being a smoker has the greatest impact.
Now, I know you’re not going to stop smoking to save money on your life insurance but its one more reason in a long list to quit. Not only will you save money on the cigarettes but you can also add a saving of around 40% on your life cover premiums too.
4. Shop around
Life insurance is a very competitive market and prices can vary widely depending upon where you look. The easiest way to compare lots of insurers and policies at once is to use one of the many free online comparison websites. The only caveat to this is to be aware that these sites only compare premiums and not cover, so have a firm idea of what type of cover you need first. This will help you to compare like with like and discover the true bargains.
Alternatively, you can use an insurance broker to do the shopping for you and this route can yield some substantial savings if you use a particular type of insurance broker.
5. Use a discount life insurance broker
If you know which type of cover you need and don’t require any advice, a discount online insurance broker can save you hundreds of pounds in lower premiums.
Due to the low costs and large audiences available via the internet, many life insurance brokers have launched websites offering life insurance quotes with major insurers at discounted premium rates. These brokers are able to discount cover from major insurers by rebating much of the commission they receive from these insurers to reduce your premiums.
Savings vary but can mean genuine reductions of between 10% and as much as 40% over the insurance company’s standard premiums. Many sites provide instant online quotes comparing multiple policies from leading insurance companies.
A simple Google search for discount life insurance will provide a list of most brokers or use an insurance directory like UK Insurance Index which also features customer reviews.
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