We often get asked by people whether life insurance is expensive and if so, what the average cost looks like. However, that particular question is much more difficult than that to answer, as there are so many variables at play. Factors like age, health and occupation all play a big part in the equation that determines how much you pay.
In this blog, we take a look at what those reasons are in closer detail so that by reading to the end, you’ll get a better idea of whether your premiums are likely to be at the higher or lower end of the cost spectrum. So, without further ado, let’s begin.
Age & Lifestyle
Life insurance companies assess everyone’s risk of passing away and whilst that might seem a little cold, it’s entirely necessary. The older you are and the more unhealthy your lifestyle is, the more likely it is that you will die earlier, which means that you represent a higher risk to the company providing the policy.
It’s a sliding scale too, so whether you’re a younger person with an unhealthy lifestyle or someone in their 50s who doesn’t smoke, drink and leads an active life, your premiums will reflect precisely how much risk you pose to the insurance company.
Pre-existing Health Conditions
Another big factor that determines what you’ll pay for life insurance is your current state of health. If you have any of what insurance companies call ‘pre-existing conditions’ (like cancer and diabetes), you could find that you might be turned down for life cover altogether. Depending on what your existing condition is, you might present too much of a risk to be given a policy.
That said, this will vary from company to company, so if you do get turned down, it’s certainly worth checking with multiple insurance providers. You’ll almost certainly pay more for your premiums than someone with a clean bill of health, but you will at least be able to get cover.
The Type & Amount of Life Insurance Cover
The total amount you want to be covered for is something that will also determine how much you pay each month, as a policy that pays out £500k is going to cost a lot more than one with a payout of £75k. What will also play a key role in your premium is the type of life insurance cover you’re after – and there are three main ones to choose from.
Type #1 – Decreasing Cover
First of all, you have decreasing cover, which is ideal for covering mortgage repayments because the payout decreases roughly in line with how much of your home loan you have left. Of the three, this is usually the cheapest one.
Type #2 – Level Cover
Then there’s level cover, which pays out a lump sum when you die, which your loved ones can use to pay off your debts and support themselves. This is a type of cover that’s often used to pay off an interest-only mortgage.
Type #3 – Increasing Cover
Operating in a similar way to level term, increasing cover goes up in line with inflation, which means that you’re protected against the cost of living going up in the long term. Out of the three types, this is usually the most expensive.
Life Insurance that Covers All Circumstances
So, to summarise, there’s no such thing as an average cost of life insurance, because we’re all different and our own unique circumstances dictate how much we’ll pay. The good news is that if you were to stop smoking or improve your lifestyle in any way, this can lead to lower premiums, so it does work both ways. The important thing is, to be honest when you apply or you could end up with cover that’s invalid if you don’t disclose everything about your current state of health.
At Be Money Savvy, we bring you blogs like this one to make better sense of the life insurance market, because that’s what we’re all about. We want our customers to be better educated on the things that matter so that they make the best possible decisions regarding their financial future. If you’d like to know more about anything we’re spoken about here or about us as a company, just head over to www.bemoneysavvy.co.uk and take a look around.
Alternatively, if you would like to discuss your home or life insurance requirements with us directly, call our friendly team on 0161 537 0555 today and they’ll be more than happy to talk you through your options.