08:28 30 May 2013
If you have loved ones who depend on the money you bring in as well as debts, you should have life insurance.
Amazingly, it's also one of the few things that have plummeted in price in recent years, even though women pay more nowadays since new EU rules brought in last year banned insurers from quoting cheaper premiums for women because they generally live longer than men.
Nevertheless, life insurance is remarkably cheap - policies can cost around just £5 a month - but you should still make sure you are not squandering money unnecessarily on your cover. Here's five ways to keep the costs down.
1. Switch to a cheaper deal
If you have an old life policy, check whether it would be cheaper to switch. You can compare prices quickly and easily by filling out the form on our site, which will email you the best quotes, or calling up to speak to an adviser.
Before taking out life insurance, work out what you need and compare quotes.
It's not cheaper to go directly to the life insurers. Using an online broker, such as MoneySupermarket should give you a better price than going to a big name company. Steer clear of commissioned brokers also. Not only are they more expensive but many of them are tied to one just life company so they can't shop around for you.
2. Don't buy more life cover than you need
As a general rule, you should insure yourself for seven to 10 times your salary, but if you employer has 'death in service' benefit you can knock a bit off. This usually pay four times your annual salary.
Check if any other policies you have include some life insurance as well. Endowment policies linked to your mortgage, for instance, often include life cover for the amount of your home loan.
3. Think about what type of policy you need
Basic level term assurance is the simplest. This pays out a fixed sum if you die within the life of the policy. For example, you may take out £250,000 of life cover for 25 years to make sure your mortgage will be paid off if you die early.
If you're only worried about making sure your family has a roof over their heads, and you have a repayment mortgage, you could buy decreasing term assurance. The amount they will receive reduces over the years along with the mortgage as it's paid off. This is obviously cheaper than level term assurance and increasing term assurance, where the amount of cover rises along with inflation. The most pricey is whole of life, which pays out whenever you die without a cut-off date. It's also more complicated, so you should take advice if you're considering this.
It's a better deal to buy two single policies, rather than a joint one with your partner. The cost is similar and you'll get two payouts rather than just one - often on the first death.
4. Consider whether you really need add-ons which push up the price
You may be offered critical illness along with your life cover, which pays out if you go down with a terminal illness, such as some cancers or heart disease. Although it's cheaper to bolt it on to your life policy rather than buying it separately, it's still costly.
You may be offered a 'waiver of premiums' which mean you don't have to pay for your policy if you're off work due to sickness, but you probably don't need this with fairly cheap life cover. Also you probably don't need to add your child to your policy.
5. Check whether there's a discount if you pay your premiums annually rather than monthly
Finally ask your insurer to write your life policy in a trust. This way your family will get the money quicker without having to wait for probate after you die and it won't be counted towards your estate for inheritance tax purposes.
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.
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