Life insurance is essential for anyone with dependants to provide them with financial security – we explain who needs it and how to get the right low-cost life insurance policy for you
Everyone with dependants and debts to pay needs life insurance to protect their family financially if they die.
However, there are several things you can do to keep the cost of life insurance to a minimum and make sure you have the right policy for you and your family.
In this guide, we explain how to get a cheap life insurance policy while elaborating on the differences between life assurance and life insurance, and making sure you get the right cover.
What affects the cost of life insurance?
There are a few things to bear in mind before you compare life insurance. You could help to reduce the cost of your life insurance by weighing up your options, taking up a healthier lifestyle and considering your age and the risk the insurer may have to take as a result.
- A couple can choose to buy a joint life insurance policy or two separate policies. Although a joint policy will be cheaper than two single policies, in the event of one partner dying, a joint policy will pay out and the policy will end. With two separate policies, the remaining partner will still be covered.
- Smokers will pay more for life insurance than non-smokers. If you smoke you could save money on life insurance by giving up. Normally, you will be eligible for a cheaper life insurance policy once you have stopped smoking for a year.
- The older you are the more you will have to pay for life insurance. As premiums are normally fixed for the length of the policy, you should take it out sooner rather than later to get the cheapest life cover.
Like all insurance you can find cheap life insurance quotes by shopping around.
Weigh up if a single or joint policy could save you more money in the long run
You must disclose your medical history fully, and if you don’t, you risk having limited or no cover. Make sure you buy from a regulated company and read the terms and conditions and key facts documents.
What types of life insurance are there?
Life insurance (which many of us also know as life assurance) can protect your family in the event of your death and pays a lump sum within the length of the policy which you have agreed with the insurer, say 20 or 25 years.
Whole life assurance options cover you until death and often charge higher premiums than the more low cost term life insurance.
There are two types of term life insurance policy – level and decreasing term insurance.
- Level term life insurance is an insurance policy that pays out the same amount throughout the length of the policy. This means that even if you die in the last year of your policy, your dependents will receive the same amount as they would have had you died a day into your policy.
- With decreasing term life insurance the amount the policy will pay out on death reduces in line with a mortgage. This means that decreasing term policies offer a more low cost term life insurance policy than level term policies, because the amount they pay out reduces over time. If you die towards the end of your policy, the payout will be smaller than if you died at the start.
- Life assurance remains in force for your whole life (as long as you keep up the monthly premiums). Even if you get a term policy lasting 10 years, there’s no guarantee you will die within that term, so you could be paying life insurance premiums for peace of mind.
Life assurance v life insurance
The slight difference in the naming of life insurance and life assurance may suggest that it’s simply a matter of preference in wording.
Although many people use the two terms interchangeably to mean the same thing, there is one small but key difference between life insurance and life assurance.
Essentially, life insurance aims to protect your family from a loss of income if you were to die unexpectedly. It’s designed to protect their lifestyle and financial wellbeing.
This usually relates to term life insurance plans – an insurance policy that runs for a pre-agreed term and only pays out if you die within that period – but as mentioned previously, some providers will use life insurance to mean the same thing as life assurance, so check exactly what they mean.
In reality, life insurance should really only be related to an insurance policy set against a fixed period of time.
Life assurance, on the other hand, is not exactly the same. Death is assured in any life, so the policy is designed to provide your family or next of kin with a lump sum to help meet their financial needs after you die, and this policy is guaranteed for life, for as long as you live or do not claim.
In a nutshell: life assurance is for life and life insurance is for a period of time you agree with your insurer.
Top tips for getting cheap life insurance
There are some things you should do to make sure you’re getting the right life insurance cover for you and things you can do to get the cheapest life cover available for your circumstances:
- Be honest about your medical history. Your insurer will ask about your health and can check with your doctor.
- Two separate policies for couples means each policy will pay out for each death. Joint policies usually only pay for the first death.
- Non-smokers pay less for life insurance than smokers – so giving up could save you money
- Shop around for cheap life insurance quotes but don’t simply pick the cheapest life cover available – do your research
- Choose the right policy and right amount of cover – check if you have cover already with your employment or mortgage – don’t pay for cover you don’t need
- Premiums tend to be cheaper the younger you are, so lock in a good price while you can!
- Life Insurance Guide Learn all about life insurance, including where to find it and what it covers
- Life Insurance Tips Read our top tips for picking the right life insurance policy
- Level Term Life Insurance Term life policies cover a fixed period of time, but how do they work?