What is life insurance?

Life insurance provides a financial safety net to protect your loved ones should you no longer be around.

You make a monthly payment (known as the premium), calculate your cover amount (the sum assured) and decide the length of your policy (the term).

When calculating your ideal sum assured and term length it can be beneficial to consider:

• Mortgage debt/monthly repayments
• Family living costs (factor in inflation)
• Household bills (electricity, gas, water, council tax, broadband)
• How many children you have
• The age of your children
• Rising funeral costs
• Whether you have financial protection through your employer

It is important to choose the right policy type, as the cost of cover varies. For example, if you only require financial protection under the children have left home and the mortgage is cleared then term-based cover may be sufficient. However, if you require lifelong cover, the more expensive whole of life insurance would be more suitable.

How to purchase life insurance

Traditionally people in the UK have purchased a life insurance policy over the telephone either direct through an insurer or via an intermediary broker. However, in 2024, many insurers and brokerages now offer a convenient buy life insurance online facility.

What’s more, there are now multiple price comparison websites, such as Compare the Market and Go.Compare, where you can compare multiple quotes free of charge online.

Whichever method you choose, it is vital to compare quotes from a range of insurers as the cost of cover can vary wildly between providers. Even a small saving each month could add up to a significant sum over the lifetime of the policy, (up to 40 years).

The UK’s major insurers

There are many life insurance providers to choose from in the UK, including smaller specialist impaired insurers, however the three major insurers who dominate a large proportion of the market are Legal & General, Aviva and LV= (Liverpool Victoria).

All these providers offer a range of pros and cons and the one which best meets your unique needs will depend on your personal circumstances, such as whether you have a pre-existing medical condition and your available budget.

Legal & General currently offer a free £110 Amazon gift card which could present a nice incentive; however, the cost of your monthly premium should be the primary consideration when choosing a policy.

Leading life insurance broker Reassured have created a comprehensive Legal & General review which provides detailed information of all their offerings, as well as the key advantages and disadvantages.

The UK’s largest insurer, Aviva, are also a good option to consider. They paid out a market leading 99.4% of all life insurance claims in 2022. They also offer their Aviva DigiCare+ app, providing policyholders with access to annual health checks, mental health help and nutritional support.

Lastly LV= offer free access to LV= doctor services and legal advice line as well as other member benefits. They also offer free terminal illness cover on all term policies sold, meaning if you fall terminally ill you could claim an early pay out to help cover key expenses whilst you are off work.

Key life insurance considerations (to help save money)

Many families in the UK and around the world are currently struggling financially due to the cost-of-living crisis fuelled by high inflation. To ensure you secure the lowest possible monthly premium there are a number of things you could consider.

See below our top 10 life insurance tips below;

1. Take the time to accurately calculate your required sum assured. Taking out more cover than you need will unnecessarily inflate your premiums
2. Take the time to decide your ideal policy term, as the longer the term, the higher your premiums will be. (This is because a pay out is statistically more likely). Often it makes sense to ensure you have cover until the children are financially independent and/or the mortgage is fully paid off
3. Factor in any cover through your employer such as death in service benefit to help lower your cover amount. (Please note if you change jobs your death in service will not move with you)
4. Compare multiple quotes from a range of insurers as costs are vary between providers, due to different underwriting processes. You can do this via a comparison website, or if you require additional support a regulated broker
5. Consider writing your life insurance policy in trust to avoid/minimise 40% inheritance tax and speed up the pay out process (as your loved ones will not have to wait for probate to be granted)
6. If you are over 50 years of age and have a pre-existing medical condition, consider an over 50s plan (which does not require any medical information to be provided during the application)
7. Always be 100% open and honest during the application process to ensure your policy is valid and pays out when your family really need the funds. Lying or withholding information during the application in order to secure a lower premium could invalidate your policy and render your selfless investment a waste of time and money
8. Decreasing term life insurance is usually the cheapest form of cover as the pay out sum reduces over the lifetime of the policy. If you only need to cover a repayment mortgage you can align your sum assured with your remaining debt, saving money
9. Your smoking status is one of the most important considerations when insurers are calculating your premium. Smokers’ premiums can be double that of a non-smoker as the habit increases the likelihood of a number of medical conditions, making a claim more likely. Why not quit smoking and reduce your alcohol intake to help lower your premiums
10. You age is the single most influential factor when calculating the cost of life insurance; the older you are, the higher your premium. Why not be proactive and take out cover as a young adult, locking in a super-low premium for decades to come whatever the future may hold

We hope this article has provided you will some valuable information on how to secure valuable life insurance protection and how to save money on your policy in 2024. Please note, the above information should not be considered as financial advice.