How much does life insurance cost?

Want to reduce the price of your life insurance? See what you should be paying and how you can save money now.

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Depending on where you are in life, it may be worth considering life insurance. If you have a mortgage or have just started a family, life insurance can give your loved ones much needed financial support if you were to die.

While the average cost of life insurance in the UK is around £30 per month, there are a number of factors that affect the size of your premium, so you may end up paying more or less than the average person. For example, people aged between 18 and 29 may only pay around £6 per month for level term cover, whereas someone over the age of 60 may pay £140 per month.
Find out how the cost of life insurance is calculated and the ways you can save below.

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What influences the cost of life insurance?

There are a lot of factors that help determine the cost of your life insurance policy, such as:

  • The type of policy you need. There are four main types of life insurance: level term cover, increasing term cover, decreasing term cover and whole-of-life cover. Depending on the type of cover you get, the cost of your insurance can increase, reduce or stay the same over time.
  • The amount of cover you want. When you get life insurance, you choose the amount your dependants will receive in the event of your death. This is called the sum insured amount, and the higher the amount, the more you’ll pay.
  • The length of your policy. You can also choose the term length of your life insurance, which is the period of time that your family will be covered. This may be 10 years, 20 years or even longer.
  • Your age, lifestyle, health and location. Insurers consider a number of risk factors when calculating the size of your premium, your height and weight, whether you smoke and your family’s medical history. The healthier you are, the lower the cost of your insurance.

When do I need life insurance?

You should consider getting life insurance if your family, also known as your dependants, would struggle to get by if you were to die. This might be because they rely on your income or if you’ve just bought a house and are still paying it off.

Life insurance can help cover the cost of mortgage repayments, raising children or even just give your loved ones more financial security. So while it may not be necessary for an 18-year-old with no children to take out life insurance, it makes sense if you’re starting a family and have a mortgage, or just have debts that you would like to be covered in the event you die unexpectedly.

What types of life insurance can I get?

There are four main types of life insurance policy. These are:

  • Level term insurance. Under a level term policy, you choose the size of your sum insured, as well as the length of the policy. Your premium will then remain the same throughout the course of the term, as will the amount your family receives in the event of your death.
  • Decreasing term insurance. If you want life insurance to cover your outstanding mortgage costs, it makes sense that you’d need less cover as you continue to pay off your mortgage. A decreasing term policy means the size of your payout will reduce over time, but your insurance premiums will also reduce.
  • Increasing term insurance. The effects of inflation are rarely felt on a day to day basis but can be noticeable over a long period of time. £100,000 in today’s money will likely have less purchasing power in 20 or 30 years time. By getting an increasing term policy, you protect against the cost of inflation, meaning your family will receive the same relative payout regardless of when you pass away.
  • Whole-of-life cover. Unlike term insurance, whole-of-life policies cover you for your entire life, provided you continue to pay your premiums. It is generally more expensive than term life insurance but can be useful to counter the effects of inheritance tax.

Many insurers will also offer specialised policies for those over the age of 50, as well as life insurance that covers you in the event you contract a critical illness. Some critical illness policies will only pay out when you are first diagnosed with an illness, whilst others may pay out both at the time of diagnosis and at the time of death.

Most life insurance policies will cover you in the event of a terminal illness, such as cancer, or total and permanent disability.

How can I save money on life insurance?

There are a number of things you can do to keep your life insurance costs down:

  • Select the right type of policy. If you are taking out life insurance to cover your mortgage payments, it makes sense to choose a decreasing term policy to reduce the size of your premium.
  • Improve your health and lifestyle. For insurers, your life insurance premium reflects the likelihood that you will die at a particular point in the future. By living a healthier life and choosing not to drink or smoke, you can reduce the cost of your life insurance.
  • Choose an appropriate sum insured amount. While it may be tempting to opt for a huge payout amount, you’ll end up paying more for your premium the higher your sum insured amount is. Life insurance is designed to protect your family financially, so make sure you select a level of cover that is appropriate and affordable.
  • Compare a range of options. As with any financial product, you should make sure you research and compare a number of life insurance policies before selecting the one that best meets your needs.

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