Many families can benefit from whole life insurance cover, yet are often put off due to cost. However, there are still plenty of ways to get a cheaper policy.
The key to making whole life insurance more affordable is to take a proactive approach. From shopping around to using discounts, there are several ways to reduce the cost of your policy. In this article, we will discuss some tips to make whole life insurance more affordable.
What is Whole Life Insurance?
Whole life insurance (also known as life assurance) is a type of permanent life insurance, protecting you for your entire lifetime. Not only that, it provides a financial safety net to protect your family if you die.
It can help your loved ones with:
- Living costs: helps cover day-to-day expenses, such as mortgage payments, rent, utilities bills, and more.
- Funeral costs: A financial strain that your loved ones don’t need during this difficult time.
- Leaving a legacy: The payout from your policy can provide future financial support to your children or grandchildren.
Once you pass away, your insurer pays out a cash lump sum to your family. To stay covered, you are required to pay a monthly premium to your insurance provider. Failing to do so can result in your policy being cancelled.
Why can whole life insurance be expensive?
Whole life insurance is often costly as it provides cover for a lifetime. Unlike term life insurance, which lasts for several years, then expires, whole life insurance lasts right up until you die.
This can result in higher monthly premiums — but ensures your loved ones are protected despite whatever happens in the future.
The cost of premiums typically depends on:
- Your age: Generally, the older you are when starting a policy, the higher your premiums.
- Health: Certain medical conditions or lifestyle habits increase your risk of dying sooner than expected, also affecting your premiums.
- The amount of coverage: The more coverage you need, the more expensive your premium will be.
- Occupation: Having a hazard occupation can increase the likelihood of death. Therefore, your insurer is likely to increase your premiums.
- Smoker status: Not only is smoking bad for your health, but it also makes you more expensive to insure.
Whole life vs term life
Whole life and term life insurance are both types of life cover, but there are a few key differences between them.
Term life insurance only covers you for a set period of time — typically 10-30 years — and then expires. In addition, the premiums for term life policies are usually less expensive than those for whole life insurance.
There are 3 types of term life cover:
- Level term: A fixed amount of cover at a fixed price for the term.
- Decreasing term: Your cover reduces each year, but your premiums stay the same. This is often taken out to protect a repayment mortgage.
- Increasing term: Your cover increases each year, and so do your premiums. This is often used to help keep up with inflation.
Whole life insurance, on the other hand, provides coverage for your entire lifetime and isn’t subject to renewal. As a result, premiums are typically more expensive than those for term life policies. But, you will have peace of mind knowing that your loved ones are taken care of.
Furthermore, whole life cover builds cash value – which you can use to help with retirement planning or other financial needs.
There are 2 main types of whole life cover:
- Balanced cover: The policy pays out a fixed lump sum when you die. Your premiums also remain fixed during the policy.
- With-profits cover: Your policy is linked to an investment fund. Your insurer uses the money from your premiums to make a return large enough to cover the payout of your policy.
Which type of cover you choose will depend on your individual needs and circumstances. If you need cover for the long-term, whole life insurance will be your preferred option. On the other hand, if you only need cover for the short term, term life insurance may be a better choice.
How to save on cover
It is no secret that life insurance can be expensive, and whole life insurance is no exception. But with a little bit of planning and effort, it is possible to make whole life insurance more affordable. Here are some tips for making your coverage more affordable:
- Shop Around: Different insurance companies offer different prices, so take the time to shop around and compare prices from several companies.
- Consider a Lower Death Benefit: You may not need as much cover as you think you do. Therefore, reducing the death benefit your policy provides can help lower the cost of your premiums, making it more affordable.
- Quit Smoking: Smoking is not only bad for your health, but also bad for your premiums. Smokers usually pay higher premiums than non-smokers, so quitting the habit can help reduce your costs.
- Improve Your Health: Good health is one of the key factors insurers consider when calculating premiums. Taking steps to improve your health — such as exercising more, eating a balanced diet — can help reduce premiums.
- Look into a joint policy: With a joint policy, both parties are covered under one policy, paying one set of premiums. This in return can reduce the overall cost of coverage.
Conclusion
Whole life insurance can be an expensive form of life cover, but it doesn’t have to be. Ultimately, you need to decide which type of cover — term or whole life — is right for you and your family. With the right planning, you can ensure that your loved ones are taken care of in the event of your death.
