5 top life insurance money saving tips [2024]

High inflation has meant that for most of us our money is simply not going as far as it once did. The recent cost-of-living crisis has forced many families in the UK to look at ways to cut back on their monthly outgoings.

As a result of this financial squeeze, it can be tempting to cancel regular monthly outgoings such as your life insurance premiums; after all no one knows whether this selfless investment will ever be rewarded in the future.

Whilst this saving may seem very appealing in the short-term, it is important to consider what would happen to our loved ones if we were no longer around to provide – especially if you have young children.

A safer alternative would be to keep the financial protection in place but evaluate effective ways in which you can save on your monthly premiums.

Below we have identified 5 top money saving tips you may want to consider…

1) Take out a joint life insurance

If your available budget is tight, it can be a good idea to consider taking out a joint life insurance cover. Joint policies are typically around 25% cheaper per month compared to two separate policies depending on your age, medical history and smoking status.

Joint cover protects two lives simultaneously (usually spouses/partners) under one policy and you pay just one monthly premium. If either party named on the policy were to pass away a cash pay out would be issued to your named dependents.

The main negative of joint cover is that after a pay out is made the policy elapses, leaving the surviving partner without cover.

2) Write your life insurance in trust (avoid 40% inheritance tax)

When you write your life insurance into trust it is detached from your estate. This means that the pay out proceeds are therefore not subject to 40% inheritance tax (IHT) potentially saving your loved one’s thousands. Remember your estate also includes any property, savings and possessions and therefore it is common to exceed the threshold £325,000 after which you pay IHT.

When writing a policy in trust you assign the rights of your life insurance over to a trustee/s to administer on your behalf, like the executor of a Will. A trustee is commonly a spouse, family member/trusted friend or family solicitor.

Also, because the funds do not form part of your legal estate your loved ones’ will not have to wait for probate to be granted before receiving the pay out. The probate process on average lasts approximately 9 months, however if there are complications it can be significantly longer.

You may be surprised to learn that writing your life insurance in trust is completely free to do and something offered by all the best life insurance companies.

Whilst using a trust can work well for many people, it will not be suitable for everyone as once the trust is written it can be difficult to amend (depending on whether it is a fixed or flexible trust).

3) Lock in a super-low premium whilst you are still young

How old you are when applying for life insurance is one of the most influential factors when insurers calculate the cost of premiums. Therefore, you could save a significant sum by taking out a policy whilst in your 20s or 30s and locking in a super-low premium for decades years to come.

Unfortunately most people only consider taking out life cover after a major life event, such as having a first child or buying a property – why not be proactive and lock in super-low premium in early adulthood? Even a small saving each month could add up to be a significant amount over the lifetime of the policy.

4) Calculate your required cover amount and term length

The higher your cover amount (also known as the sum assured), the more expensive your premiums and therefore it can be very beneficial to accurately calculate how much cover you require so that your premiums are not inflated unnecessarily.

When calculating your cover amount consider key factors such as:

• Remaining mortgage balance/monthly rental costs
• Future family living costs (consider the likely impact of inflation)
• Household bills (electricity, gas, water, broadband, council tax)
• Funeral costs (average basic funeral is £4,141 according to SunLife)
• Children’s education costs
• Whether you plan to have more children

If you receive financial protection through your employer, such as death in service benefit, you can factor this into your calculations, reducing your personal cover amount and potentially saving you money. Although, please note, if you change employer this benefit is unlikely to move with you.

It is also important to consider how long you need cover for as the longer your policy term the higher your premiums. This is simply because a claim is more likely the longer the term and so insurer mitigate this risk by loading premiums accordingly.

As a general rule, most policyholders will need their policy to protect the family’s finances until the children are financially independent and/or your mortgage is cleared.

5) Quit smoking + live a healthy lifestyle

As well as how old you are at the point of application, factors such as whether you smoke, and your alcohol consumption are key considerations when insurers calculate premiums.

For example, a 50-year-old smoker can expect to pay double that of a non-smoker for the same level of cover. This is because of the correlation between smoking and several serious medical conditions, which can impact life expectancy.

Please note, it is important that you do not lie or withhold information during the application process with a view to securing a lower premium. This is known as ‘non-disclosure’, is a form of insurance fraud and could jeopardise a future pay out, rendering your selfless investment a waste of money.

Why not quit smoking and not just improve your overall health but also help you save money on your life insurance?

Seize the day

Whilst the above should not be considered as financial advice, we hope it has provided you with some useful tips on how you could save on your life insurance in 2024.

For most of us considering what may happen to our dearest and dearest if we were no longer around is extremely uncomfortable. However, life insurance can provide a reassuring safety blanket ensuring your loved ones can remain in their family home and maintain their current lifestyle at a very difficult time.

A 30 year old non-smoker with no health problems could secure £200,000 for approximately 20p-a-day, which one day could prove to be one of the best financial decisions you ever made.

If you have loved ones who rely on you and you do not have cover protection in place why not seize the day and secure their financial future, using the above tips to ensure you get the best available deal.