It’s actually really difficult to get an accurate idea of how much life insurance costs in the UK. Here’s the range from several leading UK wesbite:
- According to Reassured: “The average cost of life insurance in the UK is currently £38.15…with an average sum assured (cover amount) of £151,972.”
- Insurance Hero claims: “The average cost of life insurance in the UK is approximately £8 per month for every £100,000 worth of coverage you need.”
- Whereas Money To The Masses claims a 30-yearold non-smoker might be able to get a 20 year £100k level term insurance plan for as little as £4.14/month.
In the rest of this article we’ll look at why there’s such a difference in price. Including:
- What factors influence the cost of life insurance
- The different life insurance coverage options
- What the average cost of life insurance is
- How to reduce the cost of life insurance
- How to pick the best life insurance for you
Let’s get started.
What Affects the Cost of Life Insurance?
The cost of life insurance can vary due to several factors, from the choice of insurance provider, regional pricing differences, and any additional coverage options selected.
Take a look at some of the key factors that influence the price you’ll pay for your life insurance premium:
- Age – younger individuals typically pay lower premiums as they are considered less likely to face health issues or mortality in the near term. As individuals age, the risk of health complications and mortality increases, leading to higher premium costs
- Health status – applicants with a history of health problems or chronic illnesses may face higher premiums due to the perceived increased risk. Underwriters evaluate medical records, and current health status, and may require a medical examination to assess the applicant’s health risk accurately
- Lifestyle choices – factors such as smoking, excessive alcohol consumption, or participation in high-risk activities can elevate insurance costs. These lifestyle choices can lead to various health complications, prompting insurers to charge higher premiums to offset the associated risks
- Coverage amount and type – the chosen coverage amount and policy type, such as term life or whole life insurance, also influence premium costs. Policies with higher coverage amounts typically require higher premiums. Additionally, policies with additional features, riders, or supplementary coverage options may come with added costs
- Gender – in general, women tend to live longer than men, leading to lower premium costs for females. This variance is based on actuarial data that reflects variations in life expectancies between genders
- Occupation and hobbies – certain occupations or hobbies that involve higher levels of risk, such as working in hazardous environments or participating in extreme sports, can lead to increased premiums – this also extends to those in what are considered dangerous professions. Insurers will consider the potential risks associated with these activities when determining premium costs, which can result in higher premiums for an increased risk
As you can see, there is no one-size-fits-all when it comes to life insurance and the associated costs. These vary based on a number of unique, individual factors, making it hard to pin down one common cost.
Coverage Options of Life Insurance in the UK
The most common types of life insurance include term life insurance and whole life insurance. Term life insurance provides coverage for a specific period, such as 5 to 30 years, typically with a fixed premium and death benefit.
Whole life insurance, on the other hand, offers lifelong coverage with an investment component, accumulating cash value over time. Additionally, critical illness cover can be added to both term and whole-life policies, providing financial support in case of specific critical illnesses – joint policies are also available, allowing couples to secure shared coverage under a single policy.
These policies differ significantly in their duration, premium structure, and potential cash value accumulation. Term life insurance tends to have lower premiums and a straightforward structure, suitable for those seeking affordable coverage for a defined period.
In contrast, whole life insurance offers lifelong protection with the added benefit of a cash value component that policyholders can access during their lifetime. Critical illness cover enhances these policies by providing a lump sum payout upon diagnosis of a covered critical illness, ensuring financial support during challenging times.
Joint policies allow couples to secure shared coverage, often with a more cost-effective approach compared to individual policies.
Average Life Insurance Costs in the UK
Average premium costs for life insurance can vary significantly based on different age groups. Typically, younger individuals, such as those in their 20s and 30s, tend to pay lower premiums due to their perceived lower risk of health complications, while middle-aged individuals in their 40s and 50s might experience slightly higher premiums, reflecting an increased likelihood of health issues.
Older individuals, usually in their 60s and above, can expect higher premiums due to an elevated risk of health complications and mortality. However, there are specific over-50s life insurance plans that require no medical checks, which can help out some individuals who have perhaps been refused coverage elsewhere with other more comprehensive cover options.
Smokers generally face higher premium costs compared to non-smokers due to the increased health risks associated with smoking – this disparity is based on statistical data that suggests smokers are more susceptible to various health conditions that can lead to premature death. Insurers often differentiate between occasional and regular smokers, with regular smokers facing higher premiums.
Life insurance pricing can also vary regionally within the UK. Factors such as local demographics, healthcare accessibility, and overall lifestyle patterns contribute to these variations, so it’s important to let your financial advisor know all your details when embarking on your sign-up process to understand each drawback.
Generally, individuals residing in urban areas with higher population density and potentially greater exposure to pollution and stress may experience slightly higher premiums compared to those living in rural or suburban regions. However, the variations in regional pricing may be influenced by multiple factors and can differ between insurance providers.
How to Get an Accurate Life Insurance Quote
To obtain personalised quotes, it is advisable to reach out to various insurance providers directly or use online comparison tools. Consulting with a reputable and experienced financial advisor is crucial, as they can offer tailored guidance based on your specific needs and financial situation.
When comparing quotes from different insurers, be sure to consider factors beyond just the price, such as coverage options, policy terms, and customer service reputation. Evaluating the financial stability and industry ratings of the insurance companies can also help in making an informed decision.
You’ll also want to pay special attention to whether or not the premiums are fixed or can be impacted by market conditions. In these cases of variable costs, the premiums can end up being unaffordable, rendering your life insurance policy redundant if you can no longer afford to carry on with the payments.
Tips for Reducing Life Insurance Costs
Lowering life insurance premiums can be achieved through various strategies – the main one is to simply maintain a healthy lifestyle, such as exercising regularly and adopting a balanced diet, as this practice can positively impact your insurability and potentially result in lower premiums. Shopping around and comparing rates from different insurers can help you find the best possible deal.
Additionally, bundling your life insurance policy with other insurance products, if applicable, might lead to reduced overall costs. It’s essential to keep in mind the significance of long-term planning and maintaining a healthy financial profile to secure the most favourable rates.
You can also add on certain policies to your life insurance plan, or pick and choose certain plans to align with your needs. Perhaps you have a temporary outgoing you want covering – such as further education fees – which can be covered by a term life insurance rather than whole life insurance which would provide too much cover, and be far more expensive than the former cover option.
Common Mistakes to Avoid When Taking Out Life Insurance
Avoiding certain mistakes can prevent an increase in insurance costs – such as hiding any existing medical conditions during the application process can lead to higher premiums or even a denial of coverage, ending with your policy being voided. Neglecting to review and update your coverage regularly might result in inadequate protection or unnecessary expenses.
Another common mistake to avoid when taking out life insurance lies in purchasing unnecessary add-ons or extra coverage can inflate your insurance costs without providing any significant added value. It’s crucial to be transparent about your medical history, regularly reassess your coverage, and carefully consider the necessity of any additional features to ensure you’re making cost-effective choices.
It’s also important to check if your life insurance plan will be impacted by any market fluctuations, as this can lead to a rise in your premium costs which can, in some cases, render your plan unaffordable for your current position. This would mean that your payments have been for nothing, as you cannot complete the premiums as needed to ensure the plan continues.
Who May Benefit From Life Insurance?
Life insurance can be beneficial for various individuals and families, particularly those who seek to secure the financial well-being of their loved ones in the event of their passing.
Some specific groups that may benefit from life insurance include:
- Families with dependents – individuals with dependents, such as children or elderly family members, often prioritise life insurance to ensure that their loved ones are financially protected and supported after their passing
- Primary earners – life insurance can provide essential financial security for primary breadwinners, ensuring that their income is replaced to support their family’s ongoing living expenses and future financial goals
- Homeowners with mortgages – homeowners who have outstanding mortgage balances can utilise life insurance to ensure that their family can manage the mortgage payments and remain in the family home in the event of their passing
- Business owners – business owners often use life insurance to safeguard their business interests and provide a financial safety net for their employees. It can help protect against the loss of key personnel and facilitate business continuity in the event of the owner’s or a key employee’s passing
- Individuals with co-signed debts – individuals who have co-signed loans or debts may consider life insurance to protect their co-signers from financial liabilities in case of their unexpected passing
- Estate owners – those with significant assets or estates can use life insurance to ensure that their estate planning needs are met and that their heirs receive their intended inheritance without the burden of excessive taxes or debts
Life insurance can widely help out a number of people in a number of situations – the nitty gritty lies in choosing the right policy for you and your individual needs. It can help to talk this through with a financial advisor to ensure you’re getting the best value for money from your plan while keeping the well-being of your family front of mind in the event of your passing.
Now that we understand the critical role of life insurance in providing financial security and peace of mind to individuals and their families, it is essential to remember that providing accurate information during the application process is crucial for securing the appropriate coverage and subsequent payout upon the passing of the policyholder.
Considering factors like existing debts, ongoing living expenses, future financial goals, and potential mortgage protection can guide you in making informed decisions. It is crucial to recognise that life insurance not only protects against outstanding debts but also supports long-term financial objectives, such as education savings, mortgage coverage, and childcare expenses.
Understanding the value of personalised coverage and its role in providing comprehensive protection can empower individuals to take proactive measures in securing the appropriate life insurance to protect their family’s future.