Cheap Life Assurance: How Much Does Cover Cost?

Cost is usually one of the first things people think about when looking for life assurance. That makes sense. Nobody wants to pay more than they need to, especially for cover they may keep for many years.

But with life assurance, “cheap” needs a little care. A low monthly premium can be useful, but only if the policy still gives you the right type and amount of cover. A cheaper policy may have a lower pay-out, a shorter policy term, fewer features or conditions that do not quite match what you need.

In this guide, we’ll look at what can affect the cost of life assurance, why prices vary, and how to compare cover without looking at the monthly premium alone.

What do we mean by cheap life assurance?

When people search for cheap life assurance, they are usually looking for affordable cover that still protects the people they care about.

Life assurance is often used to describe cover that pays out when you die. In some cases, it refers specifically to whole of life insurance, which can remain in place for the rest of your life as long as you keep paying the premiums. In everyday use, though, people may also use “life assurance” when they are comparing broader life insurance options.

That is why it helps to look at what you actually want the cover to do.

You may want life assurance to help with:

• Mortgage debt

• Household bills

• Childcare costs

• Funeral costs

• Credit card debts

• University fees

• Support for financial dependants

• Inheritance tax planning

• Leaving a cash sum to loved ones

Once you know the purpose of the cover, it becomes easier to work out whether a lower-cost policy is genuinely suitable, or whether you would be giving up something important just to reduce the monthly premium.

How much does life assurance cost?

There is no single average cost that works for everyone.

The cost of life assurance depends on the type of policy you choose, the amount of cover you want, how long the policy runs for, and your personal circumstances. Two people asking for the same cover amount may still receive different quotes because insurers assess risk in different ways.

Your monthly premiums may be affected by:

As a general rule, higher cover amounts and longer policy terms are likely to increase the cost. Whole of life insurance is usually more expensive than term life insurance because it can cover you for the rest of your life, rather than for a fixed period.

The most reliable way to understand the cost is to compare quotes based on your own details. A life insurance calculator or online quote form can help give you a clearer idea, but the final price will depend on the insurer’s assessment and the policy you choose.

Why can one policy be cheaper than another?

A lower monthly premium does not always mean one provider is simply cheaper than another. Often, the policies are doing different jobs.

For example, a decreasing term life insurance policy may cost less than a level term policy because the cover amount reduces over time. This can suit some repayment mortgages, where the amount owed should also reduce over the policy term.

Level term life insurance, on the other hand, keeps the pay-out the same throughout the policy term. That can be useful if you want your loved ones to receive the same cash sum whether a valid claim is made near the start or near the end of the policy.

Whole of life insurance is different again. It can remain in place for life, provided premiums continue to be paid, so it is usually more expensive than a term policy.

This is why the cheapest policy is not always the most useful comparison.  A better question is: which policy gives me the cover I need at a monthly cost I can afford?

Does the cover amount make a big difference?

Yes. The cover amount, sometimes called the sum assured, is one of the biggest factors in the cost of life assurance.

A policy with a £500,000 pay-out will usually cost more than a policy with a £100,000 pay-out, assuming the same person applies for the same policy type over the same term.

That does not mean you should choose the lowest possible amount just to reduce the monthly premium. If the cover amount is too low, your loved ones may still be left with a financial gap.

It can help to think about the costs your family would need to manage if you were no longer around. These might include:

• The mortgage

• Rent

• Council tax

• Utility bills

• Childcare

• Food and everyday living costs

• Personal loans

• Credit cards

• Funeral costs

• Future education costs

You may not need to cover all of these, but listing them can help you choose a more realistic figure.

Does the policy term affect the cost?

Yes. The length of the policy can affect the monthly premium.

A longer policy term means the insurer is covering you for a longer period, so it will usually cost more than a shorter policy with the same cover amount.

For example, someone taking out cover for 30 years will usually pay more each month than someone taking out the same amount of cover for 10 years, assuming the same age, health and lifestyle.

The right term depends on what you are protecting. If you want to cover a mortgage, you may choose a term that lines up with the remaining mortgage period. If you want to support children, you may choose a term that runs until they are older or financially independent.

The cheapest term is not always the right term. If the cover ends too soon, your family may lose protection while they still need it.

Single life insurance or joint life insurance?

A joint life insurance policy covers two people under one policy. It is often taken out by couples and may be cheaper than buying two separate single life policies.

However, many joint life policies only pay out once, usually after the first death. After that, the policy ends. This can leave the surviving person without cover unless they take out a new policy, which may be more expensive later in life or harder to arrange if their health has changed.

Two single life policies may cost more, but they can provide two separate pay-outs if both people die during their policy terms. That may offer more protection for families with children, a mortgage or other long-term financial commitments.

So again, cost matters, but structure matters too. A cheaper joint policy may be enough for some couples, while others may prefer the wider protection of two single policies.

Can health and lifestyle affect the cost?

Yes. Health and lifestyle can make a noticeable difference to life assurance premiums.

Insurers may ask questions about your medical history, current health, family history, smoker status, alcohol use, hobbies, travel and occupation. They may also ask for further medical information in some cases.

People who smoke, have certain health conditions, or work in higher-risk jobs may pay more for cover. In some cases, an insurer may add exclusions, increase the premium, postpone the application or decline cover.

This does not mean you should avoid applying if you have medical conditions. It simply means the quote may need a more detailed assessment. Using an insurance broker may help you compare options from different providers rather than relying on one insurer.

Should you add critical illness cover?

Adding critical illness cover will usually increase the monthly premium, but it may also add useful protection.

Critical illness cover can pay out if you are diagnosed with a serious illness covered by the policy and meet the insurer’s definition. The money could help with mortgage payments, household bills, medical treatment costs, home changes or time away from work.

It is important to remember that critical illness cover is not the same as life insurance. Life insurance pays out if you die during the policy term. Critical illness cover pays out if you are diagnosed with a covered condition during the policy term and meet the policy conditions.

Some combined policies only pay out once. For example, if you make a valid critical illness claim, the life insurance element may end. Always check the Policy Summary before applying.

What about income protection?

Income protection is another type of protection product, but it works differently from life insurance.

Instead of paying a lump sum when you die, income protection can provide a regular monthly payment if you are unable to work because of illness or injury, subject to the policy conditions.

It is not a replacement for life assurance, but it may be worth thinking about if your main concern is how you would keep up with monthly payments while still alive but unable to work.

For some people, the right protection mix may include life insurance, critical illness cover and income protection. For others, a simpler life insurance policy may be enough. It depends on your budget, family situation and financial responsibilities.

Does life assurance have a cash value?

Many protection-focused life insurance policies do not have a cash-in value. If you stop paying premiums, the cover usually ends, and you may not receive anything back.

This is different from some investment-linked or with-profits policies, where there may be an investment fund, unit-linked fund or cash value. These products can be more complex and are not the same as straightforward term life insurance.

Before applying, check whether the policy has any cash value, what happens if you cancel, and whether the premiums are guaranteed or could change in future.

Can life assurance help with inheritance tax?

Life assurance can sometimes be used as part of inheritance tax planning, particularly where someone wants to leave a cash sum to help beneficiaries meet a future tax bill.

However, the pay-out may form part of your estate for inheritance tax purposes unless the policy is written in trust. A trust is a legal arrangement, so it is worth getting financial or legal advice if inheritance tax is a concern.

You should not take out life assurance solely for inheritance tax planning without understanding how the policy works, how it should be set up, and whether it is suitable for your estate.

How do you compare life assurance quotes?

When comparing quotes, do not just look at the monthly premium. Look at what the policy actually includes.

Check:

• The type of policy

• The cover amount

• The length of the policy

• The monthly premium

• Whether premiums are fixed or reviewable

• Whether the pay-out stays level or reduces

• Whether there are exclusions

• Whether the policy has any cash-in value

A low premium may look attractive, but it may not be the right option if the cover amount is too small, the term is too short, or the policy does not match your financial commitments.

If you know what type and level of cover you want, Cavendish Online’s low-cost online quote route may be suitable. If you need help choosing between policy types, guidance or advice may be more appropriate.

Cheap life assurance: the key takeaway

A low monthly premium is only useful if the policy still does what you need it to do. The cover amount, policy term, exclusions and long-term affordability all matter too.

The cost can depend on your age, health, lifestyle, smoker status, cover amount, policy term and the type of policy you choose. Term life insurance is often cheaper than whole of life insurance, while decreasing term insurance may cost less than level term insurance because the cover amount reduces over time.

Before applying, think about what you want the policy to protect, how much your loved ones may need, and how long the cover should last. Then compare the policy details carefully, not just the price.

You can compare options through Cavendish Online’s life assurance service, or visit our cheap life insurance page if you are ready to look at cover.

Cavendish Online is authorised and regulated by the Financial Conduct Authority. This article is for information only and does not constitute personal advice.