Life insurance is a great way to protect your family’s financial status from life's uncertainties. Some people may tell you life insurance is unnecessary or a waste of money - which just isn't the case. What you should consider is the financial impact your death could have on your family. In that case, you may need life insurance cover much more than you think!
We’re here to put any reservations you may have about life insurance being expensive to rest. In fact, there are several ways to get affordable life insurance - which we aim to explain to you in this article.
How much life insurance cover will I need?
Before you can figure out the cost of cover, you need to determine how much cover your family needs. Naturally, you should ensure you buy the right amount of cover as buying too little cover can lead to extra costs later on down the line. On the other hand, over-insuring can see you spend more money on cover than required.
The last thing anyone should worry about is the financial security of their loved ones should they die at any stage. Besides protecting your loved ones financially, life insurance provides peace of mind for you and your family. As with almost any type of life insurance, owning a policy ensures your family a cash lump sum in the event of your death.
During this difficult time, the money from your policy can be used to support your family with future finances such as:
Funeral costs
Living expenses
Mortgage repayments
Childcare support
Paying off outstanding debts
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How much does life insurance cost?
You can work out how much life insurance cover could cost by applying for an online quote. This provides an estimated cost for your monthly premiums - which you are required to pay to remain covered.
When applying for a quote, you’ll need to provide a few details to your insurer - usually in the form of a questionnaire. These questions can ask for:
Your age
Current health condition
Occupation
Smoker status
The type of cover you’re looking to buy
How long you want the policy to last
Age and health are two of the biggest factors for calculating the cost of cover. Sadly, the older you are the higher the chances are for a claim to be made. This, and the fact there is a greater risk of developing medical conditions. If you’re looking for an affordable policy, applying for cover at the earliest stage helps you save on rising costs.
Types of life insurance
When it comes to buying life insurance, there are several types of policies that can provide financial support for your loved ones. Term life insurance is often considered one of the most affordable types of life insurance. Whereas whole life insurance is renowned for yielding a higher cost.
Whole life insurance (also known as life assurance)
Covers you for the rest of your life, paying out a lump sum when you eventually die.
Both the cost of your premiums and pay-out value are fixed throughout your cover if you opt for (guaranteed premiums).
Although it ensures permanent coverage, whole life policies are often expensive.
There is also over 50s life insurance- this is a type of whole life policy designed for people aged between 50 and 80, who are UK residents.
The level of cover that you can apply for through an over 50s policy is typically lower than the amount you can secure through a whole life policy. However, this type of insurance isn’t medically underwritten and therefore you are guaranteed acceptance. Note that over 50s policies also have a ‘waiting period’ which will have to pass before you can claim on the full sum assured of the policy.
Term life insurance
Provides cover for a set period of time (i.e 20 years) as agreed upon with your insurer. Unlike whole life cover, term life policies have an expiry date.
Your family receives a lump sum payment if you die within the policy term. If you outlive the policy term you won’t receive any money back for the premiums paid.
Term life insurance offers a more affordable policy compared to whole life insurance.
Term life insurance has 3 levels of cover:
Level term - Standard type of term life cover. Both the costs of your monthly premiums and pay-out value are fixed throughout the policy term (if you opt for guaranteed premiums).
Decreasing term - Typically used to cover outstanding debts, such as a repayment mortgage. The pay-out value of the policy decreases over time, usually by a certain percentage agreed at the start of your policy.
Increasing term - The policy payout increases over time to protect the value from inflation. However, your monthly payments may also increase because of this.
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Joint life insurance
Covers two people under a single policy - ideal for couples who share an income to consider.
A joint policy can be easier to manage and in some cases may be cheaper than having two separate single policies.
The policy typically pays out after the first death of a policyholder (if the policy is on a ‘joint life, first death’ basis). The policy then expires, therefore the other party will need to take out further cover if needed.
How to lower the cost of your premiums
If you’re looking for an affordable life insurance policy, here are just a few ways you can cut the cost of cover…
1.Buy cover early - the cost of life insurance can rise significantly as you get older due to an increased chance of developing health conditions. Some types of policies like whole life and level term cover offer fixed premiums. So, taking out cover at an early stage can save you money on premiums later down the line.
2. Take out a term life policy - if you're looking for a life insurance policy on a budget, and only want cover for a set period of time; a term life policy may be the best place to start. Although it doesn’t cover you permentalty like whole life insurance, premiums are typically a lot cheaper.
3. Don’t smoke - As well as being bad for your health, being a smoker can impact the cost of life insurance. Premiums are usually higher for smokers due to the effects it can have on your health as well as life expectancy. Some insurers may reduce your premiums if you stay smoke-free for 12 months or more, subject to a cotinine test..
Want to learn more about saving money on life insurance? Then check out this article - Cheap life insurance: 5 ways to save on cover in 2022.
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At Cavendish Online, we’ll help you find the most suitable and affordable route to life insurance cover that matches your individual circumstances. Speak to us today for more information or simply fill out our form online to get a quote for life cover.
