Protecting your loved ones, (whilst saving money)

This article was written by FCA registered life insurance brokers; Reassured Ltd.

It’s no secret that many of us live on restricted budgets. Therefore, when it comes to protecting the financial future of our loved ones, taking on an additional monthly outgoing, such as life insurance, can seem unfeasible.

However, not only can it be as cheap as 20p a day to protect your loved ones, but there are also a number of steps you can take to ensure you pay as little as possible for your cover.

But first, let’s take a look at why you would need life insurance in the first place…

Why do I need life insurance?

Life insurance provides your loved ones with a lump sum pay out if you were no longer around to provide for your family financially.

The loss of your income could mean that your family struggle to pay the mortgage, keep up with monthly bills and maintain their existing lifestyle.

Alongside this, they will also need to find the funds to settle any outstanding debt in your name and pay for your funeral, which, when you consider is an average of £4,417 in the UK, can become rather distressing.

Arranging life insurance can provide your family with all of the finances they need to settle these unexpected costs, continue their lifestyle with as little disruption as possible and potentially even have enough spare to enjoy as an inheritance.

Following these 5 easy steps can help you ensure you get the right cover to suit your needs whist paying as little as possible…

Arrange cover as soon as possible

Life insurance providers calculate the cost of your monthly premiums based of the level of risk you pose to them having to make a pay out.

They take into account a number of factors including;

Age
Smoking status
Health
Amount of cover
Type of cover.

The older you are the lower your life expectancy, therefore, it is understandable that as you age, the cost of your monthly premiums increases.

As a result, it is ideal to arrange cover as soon as possible to take advantage of your current age. Afterall, you will never be as young as you are today.

Due to the health and smoking status factors, it can be tempting to delay arranging life cover with the intention to better your lifestyle; losing weight, quitting smoking, becoming more active.

However, forming a new habit (or breaking an old one) can be a timely endeavour; one which leaves you unprotected whilst the changes are taking place.

Quitting smoking, for example, takes a minimum of 12 months smoke free in the eye of the provider before considering you to be a non-smoker.

Therefore, to ensure your loved ones are protected, it is best to arrange cover as soon as possible and simply review your cover when positive life changes have occurred.

Amount of cover

When looking to protect the financial future of your loved ones, it can be tempting to arrange the highest level of protection available to you.

However, this increases the risk to the insurer, meaning that the higher the level of cover, the more costly your monthly premiums.

To ensure your loved ones are adequately protected, you should determine the exact amount required to keep your family financially stable if you were no longer around to provide.

This calculation should include all major debts in your name, including your mortgage, the cost of continuing your family’s existing lifestyle, the funds needed for your funeral and any other aspect of your life you wish to protect.

This final figure will then determine the amount of cover you require.

Upon performing this calculation, it may be determined that the level of cover you require is unfeasible for your current budget. At this point you will be required to perform a trade-off, allowing you to arrange the highest level of cover your budget will allow – Afterall, some financial aid upon your passing is going to be more beneficial than none at all.

Type of cover

With regards to life insurance there are a number of different policy types available.

Each policy type is best suited to protecting certain aspects within your life and will differ on price dependant on the pay out arrangement.

For example, term life insurance will only pay out if you pass away during a specific period of time, whereas whole of life cover guarantees a pay out. This guaranteed pay out results in this type of cover being more costly.

Therefore, when arranging life insurance, it is important to consider what aspects of your life you are looking to protect and determine the right type of cover to suit your needs.

Arranging whole of life cover, for example, if you are only looking to protect your children until they are financial independent can result in you unnecessarily paying over the odds for your cover and potentially paying more into the policy than the pay out amount.

Joint life insurance

When in a partnership, it is possible to save approximately 25% by arranging a joint life insurance policy.

This type of cover protects two lives simultaneously and if either named party passes away, a pay out will be made to the surviving party.

There is one key drawback of arranging life insurance cover – The policy will only pay out upon first death. Therefore, if either party passes away, the surviving party is left unprotected and needing to arrange new cover at an older (more expensive) age.

Equally, if both parties were to pass away simultaneously, the pay out sum does not double. Therefore, this singular sum assured may not be adequate enough to equate to two lost incomes.

Whilst is it likely to be beneficial to arrange two single policies when budget allows, if purse strings are tight, arranging joint life insurance cover can ensure some protection for your family – As previously mentioned, some cover is better than no cover at all.

Compare quotes

Cost and cover vary significantly between life insurance providers, making it essential to compare quotes to ensure you secure the best deal.

This can be done independently, using a price comparison website or using an FCA broker.

Conducting the research independently can mean you can compare quotes from almost every provider on the market, however, it can be very time consuming and requires a large amount of understanding regarding industry jargon.

Without this knowledge, it can result in you securing cheap, yet uncomprehensive cover.

Secondly, you could use a price comparison website. This is a quick and easy method and compares a large amount of providers in the market.

However, again, it does require you to understand the industry and products to ensure you are arranging the level of cover you require.

Finally, you could use an FCA regulated broker. A broker will compare quotes from the industry leading providers to secure you the best deal.

They will talk to you, understand what it is you require and present you with all of the information and options you need to make the best decision to suit you.

Following these 5 steps will help ensure that your family are adequately protected at a price to suit any budget.

So why not start your journey to protecting your loved ones today?

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