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How to save money on your life insurance premiums?
During these very strange and challenging times life has rarely seemed so fragile. Many are asking themselves what would happen to their family and their finances if anything were to happen to them. That’s where life insurance is invaluable. However, for many UK families during lock-down budgets have been severely tightened.
So how do we best save money on our monthly premiums?
We asked award-winning, Hampshire based life insurance broker Reassured to share their expertise.
Why life insurance?
A life insurance pay out could be used to clear a mortgage debt, cover family living costs, pay outstanding debts, pay for a funeral and/or leave an inheritance.If you have dependants who rely on you financially, life insurance is a must. What’s more, if you are young and healthy you can secure cover for under 20p a day.
Here are our top 5 tips on how to save on your monthly premiums.
#Don’t take out more life insurance cover than you need.
Don’t take out too much cover, It may be tempting to take out the highest level of cover offered to you by an insurer. But unnecessarily high levels of cover result in a higher premium. Your cover amount should protect you against all the key aspects in your life.
- If you have a mortgage, this large debt should be covered, (so loved ones don’t have to move from the family home)
- If you have children/dependants your cover amount should protect living costs until they are financially independent
- If you have significant personal debt, this should be covered too
- Funeral costs should ideally be protected too, as the total cost of dying is now nearly £10,000 according to SunLife
It’s important not to either over or under-protect yourself and to take some time to establish the cover amount you require.
#Take out the right type of life insurance policy.
Choose the right policy cover. There are a range of different life insurance policies available, such as level term cover and over 50 plans, but the costs can vary significantly.
- Life assurance policies, such as whole of life insurance and over 50 plans, guarantee (or assure) a payout. As a result, premiums are higher.
- Term life insurance offer a lower monthly premium as a payout is only issued to dependants if you pass away during the set term.
- Decreasing term life insurance offers low monthly premium as the size of the payout reduces over time. This makes it ideal for covering a repayment mortgage.
It’s important you select the most suitable policy that meets your unique circumstances. It’s possible and can be beneficial (budget permitting) to take out multiple policies to meet the needs of different aspects within your life. For example, you might take out decreasing term cover to protect your family home and family income benefit insurance to meet future living costs.
#Compare quotes from multiple insurers (prices can vary significantly).
Always compare multiple quotes. Did you know that different insurers offer the same cover amount but often at very different premium prices? This is because they employ different underwriting processes and criteria. The best way to ensure you receive the right policy at the cheapest available price is to compare multiple quotes.
You can do this either by using an online comparison site or by using an FCA regulated broker.
#Write your life insurance in trust (and avoid 40% inheritance tax).
Write your policy in trust. Writing your life insurance written in trust ensures your loved ones secure a payout more quickly as the probate process is avoided. Even more importantly, writing your policy in trust means the proceeds don’t form part of your estate and therefore are NOT subject to inheritance tax.
You are subject to 40% inheritance tax on anyone over £325,000. When you factor in your property, all possessions and any savings, this threshold can easily be exceeded.
Lastly the trust can determine when and who receives the life insurance proceeds.
For example, if you have young children you may specify that you only what your children to receive the payout funds after they turn 18. Despite writing your life insurance in trust not costing anything, according to Aegon only 6% of policyholders do it. Why not be one of the 6% avoid IHT and make the most of your selfless investment?
#Honesty is always the best policy on your application.
Always be honest. It is very important not to be dishonest on your life insurance application, in order to get cheaper premiums. Doing so could invalid your policy and your loved ones may be denied a pay out and your investment would have been wasted. In the insurance industry this is called non-disclosure and it is the most common reason for a claim being denied. Therefore, it’s really important to ensure that when arranging your life insurance cover, all of the information you provide is correct.
How best to secure your life insurance.
To ensure you get the right cover, at the best price, it’s always good to compare multiple quotes. However, this process can be very time-consuming. One option is to use a comparison website like Comparethemarket or Confused.com. However, remember most of these sites don’t compare prices from all insurers. By using an FCA regulated broker you can save money by comparing a wide range of providers. Many brokers, such as Reassured, do not even charge you a fee for their services, as they earn their money through commission from the insurer.
So, why not seize the day and secure your family’s financial future.