You work hard to make sure that your family live a comfortable life and do not need to worry financially. But, if the worst were to happen and you were to pass away, what would happen then?
It’s a hard one to think about and one that people often choose to push to the back of their minds.
Life insurance is essential for ensuring your family’s future in the event of a worst case scenario. However, many people see life insurance as just another monthly cost to add on to their long list of expenses.
The truth is, life insurance is one of the most important things you can spend your money on, so it’s worth making the investment to make sure your loved ones will be ok when you’re no longer around. It will also help to take care of any unexpected funeral costs.
You may be surprised to learn that you can secure comprehensive life insurance protection from just 20p a day.
If you want cover and are looking to save some pennies, you’ve come to the right place.
Award winning FCA registered life insurance broker, Reassured, are here with their top tips on how to save money on your life insurance policy.
Why is life insurance important?
Life insurance will protect your family when you no longer can.
It will put a plan in place to take care of anything that may be left behind, such as living expenses, paying off a mortgage or any other debt you may have, as well as covering your funeral so your loved ones don’t have to.
How can you save money on your policy?
Here are some ways you can reduce the cost of your life insurance policy:
Always compare quotes to secure the best deal
If you were looking to insure your car you would probably browse until you found a deal that you were happy with. It’s best to do the same with your life insurance.
Don’t just head to one website, get a quote and think that has to be it. Chances are, you can find the same cover elsewhere for a cheaper price.
Alternatively you can use a broker, such as Reassured, to do all the hard work for you.
Reassured provide all the information you need and find you the best quotes to find the best price for cover that meets all of your needs.
Reduce the costs of premiums by living a healthy lifestyle
Life insurance policies are priced on how much of a risk you will be to insure. This means that insurers will ask for information about your age, smoking status as well as your health and well being.
They will then use this information to work out how much your monthly premium will be.
For example, if you are a 30 year old who does not smoke and does not have any medical conditions you will pay less than a 30 year old who smokes and has asthma.
By doing something like quitting smoking, not only will you reduce the price of your premium but you’ll also save money from not buying cigarettes. This is easier said than done but it’s something to think about.
Arrange cover as soon as possible to avoid increasing costs because of age or ill health
As we've just discussed above, your age and health play a huge part in determining the price of your life insurance premium.
To secure good cover at a good price it’s a wise idea to take out your policy sooner rather than later when you’re young and in good health rather than later in life when your health may be deteriorating.
Choose the best type of cover for your needs to prevent paying for unnecessary cover
Taking out cover that takes care of everything you need will save you in the long run.
You could take out a policy that covers you for just a few things, but later on in life you may need to add to this.
Adding to your policy later on in life when you’re older with less favourable health can lead to increased premiums.
There are many policy options; level term, decreasing term, whole of life, family income benefit, all suited to protecting different aspects of your life. Take time to decide which best meets your unique needs.
Calculate exactly how much cover you require to avoid paying for more protection than you need
The best way to calculate the cover you need is to make a list of everything that will need to be taken care of in the event of you passing away.
If you have a mortgage, this will need to be paid off. If you have a family, their living costs will need to be covered.
You’ll also need to leave funds to cover the cost of your funeral, (average cost £4,271). Your loved ones will be going through enough without the added financial stress of having to find the money to pay for your funeral.
Once you’ve got your list, you’ll have an idea of what you need your sum assured (the amount paid out) to be.
Take out a joint policy
If you and your partner are both looking to take out life insurance policies, you can save up to 25% (compared to two single policies) by taking out joint life insurance.
Joint life insurance covers two people simultaneously. This means that there is only one contract so there is only one premium to pay each month.
The thing to take note of with joint life insurance is that only one pay out will be made. This is usally upon the first death but arrangements can be made on a survivorship basis too.
Once the pay out has been made, the policy will be cancelled. This means that the remaining partner will need to find new cover.
How to make the most of your investment?
To make the most of your life insurance investment, it’s a good idea to write your policy in trust.
Writing your life insurance in trust is a legal arrangement that will ensure that your beneficiaries get the most from your policy. It is a free option that will be offered to you upon taking out a policy.
It involves putting someone you trust in charge of your policy, so upon your death they will manage your pay out and make sure it is distributed the way you wanted it to be among your beneficiaries. Trustees must be 18 or over and must have a UK bank account.
There are 3 main benefits to writing your life insurance policy in trust:
Reduce inheritance tax
In the UK if your estate (your property, money and possessions) exceeds £325,000 (single or divorced) or £650,000 (married or widowed) is subject to 40% inheritance tax.
By writing your policy in trust, it will become detached from your estate, meaning it’s paid directly to your beneficiaries and not subject to inheritance tax.
Avoid probate
Probate is the process that confirms your executors are in the position to administer your estate.
This can be a long process. In the UK it can take around 6 to 9 months for beneficiaries to receive their inheritance as they cannot make a claim until probate has been granted.
If there are any disputes between the beneficiaries about who should be getting what, this can make the process even longer (sometimes years).
Writing your policy in trust detaches your policy from your estate, allowing your loved ones to make a claim as soon as a death certificate has been produced. The funds from a policy written in trust can be received as quickly as a few weeks and can be used to cover funeral costs.
Have more control over your policy
If you do not write your policy in trust you could risk it being used to pay any unsettled debts, rather than going to your loved ones.
When you write your life insurance policy in trust, you have control to say who you would like your funds to go to.
Despite it’s many benefits, currently only 6% of people write their life insurance in trust. This can be due to not knowing writing in trust is an option or due to not understanding the process. Reassured offer free guidance and advice on writing your policy in trust.
By leading a healthy lifestyle and taking your policy out sooner rather than later, you can save some money on your life insurance policy. By writing your policy in trust you can make the most of your investment!
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