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How do I reduce my life insurance premium?

A good life insurance policy doesn't have to cost the earth, and there are several ways you can reduce your premium without compromising on your cover.

Senior couple calculating budget

There are a number of factors that could dictate your monthly premium, and understanding some of these factors will give you a better understanding of where you can save.

Comparing life insurance quotes from several different providers

When you apply for a mortgage, the lender may try to sell you a life insurance policy to go with the loan.

Though it makes sense to have some kind of protection in place when you make a big financial commitment like getting a mortgage, you’re under no obligation to accept this first offer.

Instead, take the time to shop around, compare life insurance quotes and find a policy that suits your wallet as well as your circumstances.

But be aware that cheapest doesn't always mean best – make sure you’re happy with the amount of cover, as well as type of policy and the length of the term.

Get the right amount of cover

The most common reasons for getting life insurance are:

  • To cover any outstanding debts in the event of your death.
  • Replacing lost income to provide for your family.
  • To provide a legacy for your loved ones.
  • To cover any funeral costs.

If you underestimate how much you need to be covered for, you run the risk of short-changing your dependants in the future. Likewise, overestimating the amount of cover could mean you’re paying for cover you don’t need, given your circumstances.

Use our life insurance calculator to figure out how much your family would need if you died. This will give you a better understanding of how much cover you need, which could help keep your costs fair.

Limit your policy term

Term life insurance is a common type of policy - it covers you if you die within a specific time period. This is different from whole-of-life cover, which guarantees a payment irrespective of when you die.

When you take out a term policy you choose how long you want it to run - e.g. 25 years. Reducing the policy term will mean that your premiums could go down.

There are two common types of term life insurance:

  • Mortgage life insurance: a policy where the amount of cover decreases each year (also called a decreasing term policy). This is commonly used to cover the outstanding balance of a repayment mortgage.
  • Level term: a policy where the amount of cover stays the same throughout a fixed period of time.

Mortgage life insurance policies tend to have lower premiums than level term policies because the amount of cover goes down over time. If you’re looking for a policy that specifically protects your mortgage, this could be more cost effective.

It's also important to keep in mind that your policy should suit your financial commitments, which can change over time.

For example, a 25-year level term policy might be useful when you first start raising a family. But once your children grow up and leave home, there’s less of a need to have the same amount of cover.

Separate quotes for couples

If you’re looking to get cover for you and your partner, you might think that protecting you both under a joint policy would be the best option.

However, this isn’t always the case. When you take out a joint life insurance policy (whereby the policy pays out when the first partner dies), both partners are insured for the same amount.

This may not be the best option given your circumstances - e.g. if one partner has a higher income. In this case, the same amount of cover may not be required for both partners, and you could have a lower overall premium by taking out two single policies for different amounts.

When shopping around for life insurance, get quotes for a joint policy as well as separate single policies to see which option has the better value.

Get healthy

Life insurance premiums are based on risk - i.e. the risk that you will die before the policy term ends. The greater that risk, the higher the premium.

It makes sense then that anything that helps increase your lifespan would help reduce your life insurance costs.

Life insurance companies take your family medical history into account when working out your premiums. But making lifestyle changes like giving up smoking and losing weight could eventually lead to lower premiums too.

These aren’t the kind of changes that happen overnight, though. Some insurers require you to go at least 12 months without smoking to be classed as a non-smoker (the same applies to e-cigarettes or any nicotine-replacement product).

If you've undergone a big lifestyle change like this, then it’s worth getting a new quote or letting your insurer know about what’s changed and possibly negotiate a better price.

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Life insurance calculator

Life insurance calculator

Deciding how much life insurance you need can be confusing, so we've created this handy life insurance calculator tool to help you decide how much cover you need.