Cutting the cost of your life insurance
st Dec 2017 |
Cutting the cost of your life insurance, maybe a lot easier than you might think. Here with the help of our money-saving tips, you can still get the appropriate cover while cutting the cost of your premium.
When looking for a product as important as life insurance, there are ways to keep your outlay well down, without compromising on the cover you need.
Shopping around is the first and arguably the most important step and OneQuote.ie helps you to quickly and easily compare multiple life insurance brands, looking at policy features as well as price.
But there are a number of other things to consider that should ease the burden on your wallet while.
Choose the right kind of cover
There are a number of different types of policy and kind of policy that you choose will have a dramatic impact on the cost.
Whole of life insurance is the most expensive cover to take out, because it will inevitably pay out at some point. However, if you take out term insurance instead, you can get a fixed up up to age 90.
Term Life Insurance is the most common type of life insurance and it’s suitable in most circumstances.
Parents, for example, may only want a policy that will cover them until their children have left home and/or they’ve paid off the mortgage, but still want to have a lower level cover beyond this for funeral expenses. Addding a Continuation Option provides this option.
Look for guaranteed premiums
In Ireland the options you used to be offered were either ‘guaranteed’ or ‘reviewable’ premiums for life insurance. Thankfully reviewable policies are no longer sold, but some people still have these old unit-linked policies.
Reviewable premium policy used to be marketed as whole of life unit-linked polices. The premiums started off low, but after 10 years and every 5 years thereafter, the premiums could be hiked up.
If you find yourself with one of these old style life insurance policies, then you should compare it with the cost of switching to a guaranteed term policy, where the insurer can never review the price.
Combine Mortgage Protection and Convertible Term
Think about why you want life insurance right now. Perhaps you have young children, a large mortgage and various debts. You’ll need a policy that ensures all those costs are taken care of, if you’re no longer around to contibute.
However, as time goes on, you’ll hopefully need less cover, after all, you may expect to pay down the mortgage and reduce any debt, while your children will get closer to leaving home.
One good way to keep the cost of your premium low is to arrange a decreasing term life insurance policy for your mortgage, most commonly known as mortgage protection insurance and a separate level term life insurance policy to provide an income replacement, even with the mortgage cleared.
Your premium will be calculated based on your personal risk – namely, how likely the insurer thinks you are to claim.
If you take out your policy as early as possible, you’ll usually qualify for cheaper insurance than you might when you’re older.
Switch to a healthier lifestyle
No-one wants your life insurance policy to have to pay out as it means you’ll no longer be on this mortal coil; your insurer doesn’t want this and nor (hopefully!) does your family.
Adopting healthier habits can really cut the risk you’ll need to claim, meaning your insurer will usually lower the premiums.
So, give up smoking, cut down on the booze, shift any excess weight and maybe even take up some exercise.
If you can show your insurer you’ve sustained a healthier lifestyle for a year or more, they may agree to cut your premiums – read more in our article on e-cigarettes.
Consider switching life insurers and/or multiple policies
If you’ve had a change in circumstances, you’ve made positive lifestyle changes and/or you’ve found a better policy than your existing one, you may want to consider switching.
However, there are things you need to consider. As you get older and/or you have health issues, your choice of life insurers will be more restricted and premiums will rise, so you need to think carefully before cancelling a policy you took out when you were younger and, perhaps, healthier.
You may have protection policies in place through your employer, but if you leave your job or lose it you’ll also lose that insurance
Remember that if you’ve adopted a healthier lifestyle you can try speaking to your existing insurer and asking for a cut in your premium.
It may also be an option to keep your existing cover in place and to take out a new, additional policy; read more about multiple life insurance policies in our guide.
If you are considering switching, you should always:
1. Keep your existing cover until the new policy is in place.
2. Read the terms and conditions of the new policy with care, to ensure you have the cover you expect and need.
Take care with optional extras
Many policies offer cover features such as waiver of premium, bereavement counselling for beneficiaries and terminal illness cover, as standard, if however there is any additional charge on top of the core life insurance premium for additional features, then assess whether you really need them.
Think about additional and existing cover
Remember that you should only buy what you need, so think about other protection policies you may have in place and whether you need to pay for added extras you may be offered, such as critical illness cover.
As just one example, you may already have an income protection policy – this can offer similar cover to critical illness and some IP products also offer a death benefit.
Remember that you may have any or all of these protection policies in place through your employer, but if you leave your job or lose it you’ll also lose that insurance.
Consider writing your policy ‘in trust’
Although life insurance payouts are not liable to income tax or capital gains tax, depending on the circumstances your heirs could be liable for inheritance tax on the funds.
This can be easily avoided by having your life insurance written in trust, using a straightforward procedure that your adviser, can help you with.
If this means your dependants getting a larger, tax-free slice of a payout it means that you could reduce the overall size of the payout, which will reduce the cost of your premium.
Make a will
Making a will could save you money on life insurance in a similar manner to writing policies in trust; if your intentions for your estate are defined clearly and help minimise inheritance tax payments, it could mean that you need to arrange a smaller payout for which you’ll pay less in premiums.
Shop around for the right life insurance quote
As already indicated, our top tip for getting the life insurance cover you need at the right price is to shop around and OneQuote.ie is a one stop solution that does this for you.
OneQuote.ie offer you an advantage over all other options, as we not only compare all leading life insurance company insurance products online, but we then offer the best cover product, at the cheapest fixed price – Simple!
Note: A word of caution if choosing the convenience of an online solution, be careful of who you choose, here’s what to avoid:
- An insurer offering only one insurance company product.
- An execution only online broker, that does not also give advice.
- An online broker that offers a discount in the first year only.
The wrong way to go about getting life insurance cover:
- Phoning each life insurance company directly.
This can be time consuming and more to the point will result in higher premiums, compared to using a financial broker that compares the market for you.
- Quoting on the Insurance companies own website
This allows you to get a quote in your own time, but this again limits the comparison against other insurers. What’s more, strange as it may sound, you will find that you can get the same policy cheaper by going through a third-party site i.e. an on-line broker.
- Visiting a financial broker
Financial trokers will compare several different insurance companies on your behalf and this can be a way of doing business locally. However you will pay more compared to an online financial broker who also compares the market and offers full term discount.
- Dealing with your bank
A financial adviser in a bank is typically tied to one insurance provider, so you will lose out on both choice and value for money.
5. Meeting with a life company rep
These guys are tied agents, so you dont offer choice nor best market value.
Read more about how to choose a financial adviser.
Honesty is the best policy
It’s never a good idea, to hide a medical condition or to say you don’t smoke because you planning to give up. Although a medical exam or medical report is not always required by the insurer, when it comes to paying a claim, if the insurer discovers you misled them they might refuse to pay out, leaving your family with nothing.
It’s worth knowing that only serious medical conditions will tend of affect you premium and that sometimes an improvement in health can reduce it in the future.
Also, if you are a tobacco smoker but give up smoking later you can approach the insurer for a reduce rate in the future.
On the other hand if you do have a long term medical condition or engage in dangerous pursuits or travel to high risk counties that may have an effect on your premium, OneQuote.ie will still offer a discount against the higher premium.