Save 50%+ on your life insurance
Life insurance continues to fall in price, but you can get it even cheaper if you do these two things.
A short time ago I wrote that I'm surprised we have to pay anything at all for financial products when you consider how much money companies tell us we can save. The latest report from Sainsbury's Finance is another example, as it finds that we could save hundreds on our life insurance each year by doing just two things.
Sainsbury's Finance says that life insurance – which helps pay bills and dependant support costs when a key figure in the family dies – fell in price again for the second year in a row. This means the price of life insurance has fallen now for most of the past decade, thanks to improving medicine and increasing life expectancies.
The supermarket insurer says prices have come down for all new customers, regardless of gender or whether you smoke. However, the difference in price between the cheapest and most expensive insurers remains large, at nearly £100 per year (based on data from Moneyfacts on the average level life insurance quotes in January 2012).
The cheapest 25% of insurers were quoting less than £11 per month, which could get your dependants a payout close to £200,000 if you were to die young. The most expensive 25% were quoting an average of more than £18 per month. The price of your policy is based on your age, whether you smoke, and a variety of other factors.
Since these are based on shop-around prices, we can expect that some of the insurers that do not let themselves be easily compared cost even more. Banks, for example, are notorious in my experience for cross-selling expensive products to their unfortunately loyal customers. Some of them probably sell over-priced life insurance to those who don't look at prices elsewhere.
Non-smokers save another 40%
In addition to these savings, you could expect to save even more if you quit smoking for 12 months. Sainsbury's Finance found that non-smokers save another 41% compared with smokers.
The insurer doesn't offer figures showing the complete picture, but I'd estimate that the average non-smoker who shops around pays the best part of £10 less per month, while the average smoker who pays top price and doesn't shop around probably pays over £20. In other words, you could pay one half or perhaps even one-third of the cost by comparing prices and quitting smoking.
Cutting the cost further
The figures shown above refer to level life insurance, which is a lump-sum payout on your death that is fixed regardless of when you die during the policy. If you've chosen to cover yourself for 25 years, your chosen beneficiaries will get the same amount if you die tomorrow or in 20 years.
You can cut costs by opting for a decreasing life insurance, which reflects the fact that each month that goes by your beneficiaries need less support, because some of their needs are in the past and already paid for. An 18-year-old will need a lot less than a newborn to support them until their early 20s, for example.
Or you could get a life insurance policy called family income benefit, which pays a more manageable income rather than a lump sum, from the point you die until the end of the policy period. For more on family income benefit, check out Save 35% on your life insurance!
All three types of life insurance policy usually have very few exclusions, paying out under almost any circumstances if you die during the policy period, but make sure you read the documents carefully and answer any questions correctly and completely.