27 Aug 2023

How to keep down the cost of life insurance

We all want to save money where we can – especially during a cost of living crisis – and that includes the amount we spend on life insurance. But is there such a thing as low cost life insurance, and how can you reduce your monthly life insurance spending without compromising your financial protection? In this article we look at some of the ways you could keep your life insurance costs down.

Mother and baby son at the laptop doing calculations

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Why is my life insurance so high?

The cost of a life insurance policy is based on a number of things, such as your age, medical history and amount of cover. If you are more likely to make a claim, this will be reflected in the amount you pay. 

You can get life insurance from as little as £5 a month depending on the cover you need, but it’s worth remembering that the cheapest life insurance isn’t necessarily the right policy for you.

We’ll explore next the factors that will influence how much your policy might cost, and if you’re eligible.

Factors that affect the cost of life insurance

Every person is different, and the amount you’re likely to spend on life insurance will depend on your circumstances. Here are some of the main cost factors for life insurance:

Can you reduce the amount you pay for life insurance?

Yes and no. On the one hand, the amount you pay for your life insurance is fixed when you take out the policy, meaning you’ll pay the same amount each month regardless of any changes to your health and lifestyle.

However, If you are a smoker and you stop smoking for 12 months you could be eligible to take out cover as a non-smoker, which may be cheaper than your original policy.  It's worth keeping in mind that life insurance gets more expensive as you age, so it can pay to shop around.

You could review the amount of life insurance you have from time to time. If your protection needs have changed, you could be paying for more cover than you require.

Tips for reducing your life insurance costs

There are different factors that affect the cost of life insurance, and many of these relate to how you set up your policy. Below, we look at some of the ways you can keep your life insurance costs down.

Graphic showing top tips for keeping down the cost o f life insurance

1. Work out exactly how much life insurance you need

One way to protect your bank balance is to avoid over-spending on life insurance. Before you take out a policy, it’s a good idea to have an honest assessment of how much money your loved ones would need in the tragic event you pass away. Questions to consider include:

  • How much is your monthly rent or mortgage payments?
  • Do you have outstanding loans or debts?
  • Would your surviving partner be able to manage financially, including any childcare or caregiving responsibilities?

Legal & General’s life insurance calculator could help you figure out how much life insurance you might need. Plus, our budget planner could help you understand your monthly outgoings better.

2. Choose the right length of policy

Another way you can reduce your life insurance premiums in the long run is to choose a policy length that matches the needs of your household. For example, if you simply want a life insurance policy that lasts until your children reach a certain age, only choose that number of years rather than extending the policy even longer. Or if you want to specifically cover the length of your mortgage, make sure the policy length matches your mortgage term.

3. Choose the right life insurance policy

Not every type of life insurance is the same, so selecting the right type of cover can help you restrict your spending to the protection you actually need.

Decreasing Life Insurance may be suitable if you simply wish to cover a repayment mortgage because the amount of cover reduces roughly inline with the way a repayment mortgage reduces and it can be a cheaper option.

A life insurance policy can pay a cash sum to put towards other expenses – from household bills to childcare costs or rent or mortgage payments. 

Its important to remember that life insurance is not a savings or investment plan and has no cash value unless a valid claim is made.

What’s more, choosing between single or joint life insurance is a decision that could save you money. Couples looking for low cost life insurance could consider a joint policy, which is usually cheaper than two single policies, as it only pays out once, in the event of a valid claim. However, some couples opt for two single policies so that both people in the relationship have their own financial protection in place.

4. Don’t delay

It’s worth remembering that life insurance is generally cheaper when you’re younger – as age is a factor that affects the cost of life insurance. So if you have family or anyone else that relies on you financially, or you have a mortgage it could be wise to look at life insurance.

5. Compare life insurance quotes

Before you take out life cover, there is nothing to stop you shopping around for the best life insurance quotes. While the amount you pay in premiums is one consideration, you may also wish to check the finer details of any policy. For example: does the insurer offer the option of adding Critical Illness Cover? If so, which critical illnesses are listed?

If you’re interested in Legal & General’s life insurance, you can get an instant online quote by sharing a few key details.

Can a life insurance trust protect your family financially?

Finally, some people choose to write their life insurance policy ‘in trust’. A trust is a legal arrangement managed by trustees, such as family members, and pays out upon your death or a specified date. By taking this step, your life insurance policy will not form part of your estate and may not be liable to pay Inheritance Tax on the proceeds of the policy in the event of a claim.

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