What is life insurance?
Life insurance simply provides a financial safety net for our loved ones should we no longer be around to provide. It is especially relevant if like me you are a proud mum.
You pay a fixed monthly fee known as the premium and if anything were to happen to you during the lifetime of the policy a cash sum is paid to your dependants. Life insurance may be more affordable than you imagine; a healthy 30-year-old non-smoker could secure approximately £200,00 for just 20p-a-day.
The proceeds from a pay out can be used as your family wish, however they are commonly used to clear a mortgage, cover rising family living costs, provide an inheritance and cover the children’s education.
Premium costs are determined by the likelihood of a future claim and the cover amount (or sum assured). As a result, the older you are at the point of application the higher the premium (as a claim is statistically more likely).
But for many families in the UK right now money is tight and therefore it is important to secure the lowest possible monthly premium.
Below we have collaborated with an insurance expert to explore 5 top money saving tips…
Take out cover in early adulthood
Your age along with other key factors such as your smoking status and medical history are very influential when determining the cost of cover. Therefore, you could secure a very low premium for many years to come by taking out cover in early adulthood.
Most people only consider life insurance after having a child, getting married or buying their first house. But why not be proactive and lock-in the lowest possible premium before these major life events occur?
Factor in any employee benefits
Many people benefit from some form of financial protection through their employer, such as death in service. This is usually a multiple (often three times) of your annual salary.
Why not factor in this cover when calculating the level of personal cover you require, helping lower your premium and saving you money?
Joint policy or two single policies?
A joint life insurance policy is approximately 25% cheaper compared with taking out two separate policies and so if money is tight this is a good option.
Joint policies cover two lives simultaneously and you pay only one monthly premium. However, please note a joint policy will only pay out once (on the first death), after which it elapses.
Consider writing your policy in trust
There is a simple way of ensuring a future life insurance pay out does not form part of your legal estate and is therefore not subject to 40% inheritance tax on anything over the £325,000 threshold – write your policy in trust.
Writing your life insurance in trust passes the rights of your policy onto a trustee/s to administer on your behalf, much like the executor of a Will. The trustee is often a spouse or family member but could also be a solicitor.
As well as avoiding inheritance tax your loved ones can also receive the funds faster too, as they will not have to wait for probate to be granted first.
All major insurers offer a trust form, and it will not cost you a penny. Despite the obvious benefits it is thought that less than 6% of policyholders write their life insurance in trust.
Always compare multiple quotes
The most effective way to secure the best life insurance deal is to simply compare multiple quotes from a variety of providers. Due to different underwriting criteria the cost of cover can vary significantly between insurers and so it is vital to run a market comparison. Even a very small saving each month can equate to a large sum over the lifetime of the policy (up to 40 years).
If you require support and guidance using an FCA-regulated life insurance broker is a good option. They can guide you through the application process, help you write your policy in trust and answer any questions that you may have.
If you know the policy type you want and the level of cover you need, then you could use a reputable comparison website to find a good deal. Whichever method you use, the important thing is to compare quotes. Mums, you can compare quotes completely free of charge at Reassured.
As a parent, nothing is more important to us than our children. Noone likes to consider what may happen to our loved ones if we were no longer around to provide, however life insurance can at least ensure we do not leave a financial burden behind.
