Do you know the saying the value of your investment may go up or down?
Well, the same could be applied to life insurance. The value that your policy needs to cover your life for may go up as well as down.
The trick to controlling the premiums is to monitor your policy at key stages where the premiums could be lowered.
4 Tips to Lower Your Life Insurance Premiums
Stopping Smoking Loses the Premium Loading Element
Premium Loading is the term used for any premiums added to reflect the level of risk. All insurers accept smoking to be risky therefore when you check the box to indicate you’re a smoker, you can guarantee your policy will be premium loaded to cover that risk.
Smoking puts millions of pounds into the accounts of insurers. Due to the higher level of risk of developing either a long lasting health condition, or dying prematurely from lung cancer or other conditions caused by tobacco products, a smokers life insurance policy will always be premium loaded.
The only way to avoid paying more is to quit smoking. And quitting does mean quitting because you need to be smoke free for one year, and sometimes be required to prove that through a GP test, to be eligible for the standard premiums as a non-smoker.
Even switching from 10-a-day to social smoking even just one on a weekend, you’ll still be categorised a smoker. The higher your risk, the more you pay.
The definition that insurers go by for a non-smoker is someone who hasn’t smoked in the past 12 months. This includes cannabis smokers. It is possible for recreational cannabis users to get life insurance through specialist insurance providers, provided it’s light to moderate use. Heavy use won’t be covered. Any other recreational drug use will need to have been stopped for a few years before being considered for life insurance.
Once you have quit smoking for 12-months, you can request a review of your premiums to take into consideration your non-smoking status to lower the amount you pay. Naturally, if you fall back on the bandwagon, you’ll need to notify your insurance provider, at which point the premiums would hike back up again.
One Policy, One Payout: It’s Cheaper than Single Policies
The main difference between single and joint policies is a joint policy only pays out once. So, the person to live the longest gets the money and then they don’t have a life insurance policy after it’s paid. Two single policies mean that once you or your partner die, one policy is paid out, the other remains active.
If you don’t have dependents and only need the level of cover to pay off a mortgage or for a fixed lump sum, a joint policy will work out cheaper.
Downsize your home – Downsize your policy
The time to buy life insurance is when you take out a mortgage. It’s likely to be the largest investment in your life, and for a significant amount. A cost you don’t want to leave someone else struggling to meet the repayments on.
However, when you move home, either upsizing or downsizing, there will be a difference to the level of cover you realistically need. It could be higher or lower than before, but either way, you should contact your insurance provider. Some firms will not allow an increase to your policy but instead offer a new policy for the amount difference. If you’re downsizing, you’ll be able to lower your policy amount, however there’s usually a minimum level of cover such as £5 per month.
In 2014 research by Sainsbury’s Bank Life Insurance found that three in ten people, who had moved home within the previous five years, had not reviewed their life insurance. If you don’t review you, you won’t find out if you could be saving.
Plan for Tax
To get the maximum out of your life insurance, it should be placed into trust. Unbiased.co.uk, in partnership with Prudential run an annual campaign called Tax Action. Last year, it was revealed that £595M in UK life insurance payouts was effectively wasted by failing to plan for Inheritance Tax.
Keep an eye on your policy and what’s going on in your life. Always read the Key Policy Information sheet supplied from your insurer as that will give you pertinent details about what you can do with your policy, such as decreasing your level of cover.
To get the best level of life cover for an affordable price, it’ll always be for what you need.