Many people think life insurance is an expensive form of cover and so don't bother to take it out, but that isn't actually true. And there are ways to make it very cheap, although you need to be aware of what you're sacrificing in return.
Here are some ways to reduce the cost of your monthly premiums and make sure your family is protected should the worst happen.
Work out how much cover you really need
As with any form of insurance, the more cover you need, the more expensive the policy will be. So sit down and work out how much your loved ones would need should you pass away.
What do you need the life insurance to cover? Is it just the cost of the mortgage?
Or do you want to add some extra cash on the top to help with things like the kids’ schooling costs?
You might already have some cover via your employer, so make sure you factor that in too.
Only get as much cover as you think you need, otherwise you're essentially overpaying.
As with all forms of insurance, it pays to shop around to ensure you get the best deal, whether you are buying a policy for the first time or already have cover in place.
However, the small print will vary between insurers so make sure you know exactly what you are signing up for.
Go for a shorter term
Some insurers offer whole-of-life cover, which means that there’s no set term for your cover – your loved ones will get a payout whenever you die. This insurance is significantly more expensive than going for insurance that only covers a set term.
So if you want to save money go for term assurance. But work out how long you need that cover for.
If the main thing you want life insurance for is to cover the cost of your mortgage which has 20 years to run, do you really need cover for 30 years?
Cutting the term of your policy can cut your premiums noticeably.
Get decreasing cover
Perhaps the two most common forms of life insurance are level term assurance and decreasing term assurance.
Level term assurance means that for the entire term of the policy (say, 25 years) the amount of cover your loved ones would receive should you die remains the same. In other words, whether you die in year two or 22 of a 25-year policy, they will still get the full payout.
Decreasing term assurance means that over the term of the policy the level of cover decreases. So if you die in year 22 of a 25-year policy your loved ones will get a much smaller payout than if you die in year two.
This type of life cover is popular with people with mortgages as the payout decreases in line with your mortgage debt (in theory anyway).
Because the level of cover gets smaller over time, decreasing term assurance works out a fair bit cheaper than level term assurance.
When you take out any insurance policy, the premium you pay is based on how likely it is that you will need to make a claim. Life insurance is no different; if the insurer believes there’s a good chance you will die within the term of your policy, your premiums will be more expensive.
Now some things are beyond your control. If you’ve already suffered health problems in the past you should be completely honest about this. Failure to disclose past issues could invalidate your policy.
But if you know that you could do with dropping a few pounds, or want to pack in smoking, then the fact that your life insurance will be cheaper could be a useful extra motivation.