If you feel it’s time to take out a life insurance policy, one of the things that may be holding you back is the cost. With so many policies available at different premiums, how do you know what is worth paying extra for or whether you are getting the best price?
While quality life insurance does come at a cost, learning a little about the different kinds of insurance can help you find the best deal as well as adequate cover. Here are a few key ways that you can make savings on your life insurance.
Calculate Your Coverage Needs
To feel confident you aren’t spending too much, it’s wise to start by determining how much money your dependents would need. Without a concrete number in mind, it’s easy to overpay on your premiums.
There is no one-size-fits-all answer to how much you need, as it will completely depend on your personal circumstances. For instance, if your children are older or your spouse has a full-time job, you may need less coverage than a person who is the sole breadwinner and has children under five. If you have any existing debt, this will also have an impact on the cover you require.
However, there are various online calculators provided by Irish insurance companies that will help you reach an approximate figure. Try a couple of different calculators to compare the numbers, or contact a professional for a more personalised result.
It’s a good idea to review your needs every few years, or more frequently if you experience any big life changes like buying a house with a bigger mortgage or having another child. It takes a little effort, but keeping on top of this will help ensure you always have adequate cover.
Make Lifestyle Changes
The cost of life insurance policies naturally relies heavily on your current health. While many of these factors are out of your control, there may be some areas where you can make a change.
For example, if you are a smoker, quitting the habit could cut your premiums in half. That’s a huge saving to be made alongside great benefits to your health. To be no longer considered a smoker, most insurance companies will require you to have been nicotine-free for 12 months before they will adjust your policy.
You may be wondering how your life insurance company will know if you’ve quit smoking or not. Though it is unlikely, you could be randomly selected for a cotinine test at your GP. This involves taking samples of blood, urine, saliva and sometimes hair to see if there is any cotinine or nicotine in your system.
In spite of that, according to research by the AA, four in 10 smokers lie on their application forms. However, if the worst happens and your insurer can prove that you used nicotine in the 12 months prior to taking out the policy, they will refuse to pay out.
Choose Monthly Income Insurance Over Lump Sum
Rather than receive a lump sum payout, a couple of insurers (currently only Zurich Life and New Ireland) give you the option of a monthly tax-free amount. This amount is designed to replace your income.
These types of policies are a form of decreasing or reducing life cover, which makes them less costly for the insurer. In the event of a claim, they would only have to pay out a relatively small amount each month as opposed to the large, one-off amount required for standard life insurance. As time passes, the risk to the insurer also reduces. The later they have to pay out, the fewer monthly payments they have to provide.
These savings are passed onto you in the form of lower premiums, which can save you a few hundred euros over the course of a year. You may also have the option of adding some lump sum cover (intended to cover final costs like funeral and legal expenses) and whole of life cover to these kinds of policies.
Whole of life continuation can potentially offer significant financial benefits. It guarantees a payout in the event of your death, but you will only pay monthly premiums for the duration of your monthly income policy (25 years, as an example). If you live past the 25 year period then you will no longer pay monthly premiums but will still be covered until you die.
Choose Shorter Term Cover
In Ireland, you can generally choose from two types of life insurance: term or whole of life. As the names suggest, term insurance covers you for a certain number of years while whole of life gives you cover until you die. Opting for shorter term cover, for instance 25 years as opposed to 40 years or life, is one of the simplest ways to reduce your initial life insurance costs. See our post on who needs life insurance for more information.
This may be an appealing option if you have younger children but are also on a budget. It gives you the security of a payout while your kids are still dependent (and the financial burden is greater than when they are adults).
However, it’s important to bear in mind that a longer term, fixed price policy may work out cheaper over time. If you think you may want to extend your policy at some point in the future then make sure to choose one with a conversion option. This will allow you to do so without providing any additional medical information.
Finally, once you are clear on the kind of policy you are looking for, it’s never a bad idea to compare different quotes. Premiums can vary a lot from company to company, even for the same person looking for the same type of cover. In Ireland, the main companies you will want to look into are:
- Irish Life
- New Ireland
- Royal London
- Zurich Life
It may take a while to provide all the information they need, but seeking multiple quotes before committing can save you a significant amount of money. Comparison websites will help make the process easier, but don’t forget to read the fine print of each policy before you commit.
While it’s great to get a low price, you need to make sure you are getting suitable and adequate cover to protect your family’s future. If there are any parts of the policies you’re not quite sure about, then our Simple Guide To Life Insurance In Ireland may help.
Life insurance is an investment well worth making, but that doesn’t mean you need to pay over the odds to get the cover you need. The best policy for you will always depend on your personal circumstances, age and budget. But with so many options out there, it can be hard to find the right deal for you.
If you would like personalised life insurance advice, we would be happy to help. Our experienced team at SCK Group provides accounting and financial planning services for individuals and businesses in Ireland. Through a preliminary consultation, we can help you formulate a plan that will give you all the coverage you need, along with the confidence that your family will be taken care of. To get in touch, simply head over to our contact page and we’ll get back to you as soon as we can.