Skip navigation

How do I save money on life insurance?

Life insuranceWhen you buy any kind of insurance, there are two main issues to think about: firstly, is this the right type of cover for me and, secondly, is this the best price I can get? This applies to life insurance as much as any other policy.

So if you want to get a cheap life insurance quote, what is the best way to go about it? There are a wide range of factors which dictate the cost of life insurance, and understanding these factors will give you a good idea of how you might be able to cut your quote so you’re getting the right protection at the right price.

Compare quotes from as many providers as possible

The simplest way to find cheap life insurance is to get quotes from as wide a range of providers as you can. This is where the internet comes into its own: services like take all the effort out of shopping around and can help you find the cheapest life insurance quote in just a few minutes.

This allows you to tailor your policy so you’re getting exactly the cover you need at the lowest possible cost. Price-comparison services let you see what changes to the amount or scope of cover could mean for your premiums.

Life insurance is often linked to a mortgage: if you’re taking out a new loan, your bank, building society or mortgage adviser will often try to sell you life cover at the same time.

Of course, signing up for protection is an especially good idea when you’re taking on a major financial commitment like this: but you are under no obligation to accept the deal your lender is offering. A better idea is to use this opportunity as a spur to shop around for the best-value policy.

If you are better off with a new provider then don't be afraid to check your current policy and cancel.

Reduce the scope of your cover

Opting for an insurance policy which provided less cover every year (known as decreasing-term insurance) will make your premiums lower than insurance at a fixed rate (level-term insurance). And limiting your policy to 20 or 25 years, for example, can also help you save. But strategies like this do not necessarily mean you are going without the insurance you really need: they are often entirely appropriate ways to set your policy up.

For example, life insurance is most frequently taken out to cover commitments such as a mortgage or raising a family. But these commitments change over time: the amount you owe on your mortgage will fall as you pay it off, and your children will grow up and leave home eventually – both these factors mean that your requirement for insurance falls.

Every little counts…

Even if you can’t afford to take out a life insurance policy that covers the whole mortgage, or that would provide your dependants with a lump sum worth many times your annual salary, it’s is worth getting at least some protection if you have others relying on you financially.

Draw up a budget to help you decide how much you can actually afford to spend every month on premiums. Then it’s a question of shopping around to find the greatest amount of cover you can get for that price. Remember it will be possible to increase your cover as your financial circumstances improve.

Buying as a couple?

If you’re looking for insurance as a couple, you could save money by taking out a single joint-life policy rather than each buying an individual policy. Joint-life policies pay out only when the first partner dies: after that the policy is cancelled. This means they are invariably cheaper than two separate policies, which will pay out when each partner dies.

However, do bear in mind that two separate policies offer a greater range of cover, even if this route may be more expensive. When you compare life insurance prices, get quotes for joint as well as separate policies to see which option works out as better value.

Boost your health

Your life insurance premiums depend on factors such as your age, your health and your lifestyle. There’s not much you can do about how old you are, but improvements to your lifestyle – shedding excess weight, say, or quitting smoking – can eventually lead to lower premiums.

Some insurers will require you to have given up smoking for at least a year before this has any positive effect on your premiums. Consider trying to renegotiate your policy or seeking a better deal if your health or lifestyle improves after you have signed up for cover.

Cut your family’s tax bill

Saving money on life insurance isn’t just about reducing your premiums. It is also worth thinking about how to make sure your dependants can get hold of any payout with the lowest possible tax charge if the worst does happen.

Writing your life insurance policy in trust means the cover is ring-fenced outside the rest of your assets, such as savings, investments and property.
This means that payments from the policy are not included in your estate for inheritance tax purposes.

At the moment, inheritance tax is charged at 40 per cent on any bequeathed assets above the £325,000 threshold. So depending on the value of any property or investments you have, up to 40 per cent of a life insurance payment could end up in the taxman’s hands if the policy is not written in trust.

A trust is normally simple and cheap (or even free) to set up: talk to your insurer when you take out your policy, but bear in mind that a trust is not appropriate in all circumstances.

Find out more about life insurance