How to Find Cheap Life Insurance
Choosing the Right Life Coverage & Shopping Around Saves Money
Sep 18, 2009
The reasons why consumers should take out life coverage may be easy to understand but finding the right kind of life insurance policy may not be so simple. Buying a cheap policy to simply save money may make sense now but it could leave a family in financial difficulties later. Consumers may be wise to look at their policy needs first before looking for lowest cost quotes.
Why is Life Insurance Important?
The individual taking out a life insurance policy does so on the basis that they are protecting other people and not themselves. These products are, after all, designed to work when the individual dies and any benefits go to their next of kin.
The key factor to consider here is what would happen if the individual died. Could their partner/spouse cope financially with their current and future commitments? How could they deal with issues such as mortgages, rents, loans, living costs and school/college expenses, for example? If they could manage alone then there may be no need to take out a policy. If, however, they would not have the money to manage alone, then life insurance may be essential.
How to Assess Life Cover Needs
Everyone has different needs here. In general terms factors that need to be considered include:
- What would the people left behind have to pay for (i.e. mortgages, loans, debts, etc.)?
- How much other income would they have coming in without the salary of the insured party?
- Who needs to be looked after (i.e. does the individual leave behind any dependents) and for how long?
So, for example, a young couple who both work full-time may only have their joint mortgage to worry about. But, a couple with a young family where one of the parents has given up work to look after the kids may need a lot more insurance for a lot longer to replace the income they've been relying on.
Choosing the Best Life Insurance Solution
Although life coverage has a common aim, not all policies work the same and this can affect their cost. The previous research into how much coverage was needed, why it was necessary and how long it should give protection for may make it easier to choose the right kind of policy. Primary options include:
- Term coverage: These policies are designed to pay out if the holder dies within a specific timescale. So, for example, if an individual took out a policy for 25 years for £100,000 then their family would be paid that amount as long as they died when it was in place. If the individual died outside of the term then their family would get nothing. One variation here that may be worth considering for those with few financial commitments or no young dependents is decreasing term insurance. This kind of coverage will often be set up to mirror the value of a mortgage. It will, therefore, decrease in value every year as the mortgage debt decreases with the aim of providing just enough to repay it if a claim is made.
- Whole life coverage: These policies do not have an "end". A whole of life policy will make a payment on death no matter when the insured party dies.
- Family income coverage: These policies do not necessarily pay a one-off lump sum. They are designed to pay a regular income to the next of kin as an alternative.
The most expensive option here will be whole life coverage. These costs are higher because the insurance company knows that they will have to pay at some point. Term insurance and family income benefits will generally work out cheaper. The cheapest option, however, is often decreasing term insurance due to the fact that the payment amount gets lower over time.
How to Find Low Cost Life Insurance
At this stage the consumer should have worked out what kind of life coverage may suit them best and how much they want to take out. Their next job should be to try and find the lowest possible cost for the right kind of policy.
Given that there are so many options on offer in this sector, this can seem a daunting task. Comparing every policy individually may not be a viable option but consumers can work towards actually doing this by getting some outside help.
They could, for example, approach an insurance broker to help them dig out the lowest costs. Do bear in mind that brokers do not all work right across the sector and may only represent a few specific insurers. Talking to a broker that can work independently anywhere in the industry may be more cost effective.
It may also be a good idea to check out online life insurance comparison sites and financial advice portals. These bring together typical rates and deals from many different companies in one place. They can, therefore, give a useful snapshot view of which policies are the cheapest at any given time.
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