Policy Factors Affecting The Cost Of Life Insurance
Just as there are certain personal factors that can affect the cost of Life Insurance, there are also certain policy factors that could affect how much you pay.
Increasing The Level Of Benefit Increases The Cost
When it comes to the level of cover needed most people will align their benefit amount with any outstanding debt that they have e.g. a mortgage or loan. This is to ensure that should they pass away, those left behind can afford to pay the remaining debt off.
The more cover you need the more the insurer will need to pay out and so the higher your premiums to cover this risk.
The Longer You Need Cover The Higher The Premiums
The length of time you would like your policy to run for will also affect how much you pay for your cover.
As mentioned above, with Term Insurance your policy will run for a set amount of time until you reach a certain age, where as a Whole Life Policy will pay out regardless of when you die.
The longer you need cover the higher the risk of you dying and this is reflected in higher monthly premiums.
Because there is no end date on a Whole Of Life policy you can expect to pay a significant amount more than you would for Decreasing or Level Term Insurance as the term is indefinite.
It Costs A Lot More To Include Critical Illness Cover
One option you have when it comes to Life Insurance is to add Critical Illness cover to your policy. By adding this optional extra to your cover, as well as paying out on your death, your policy would pay out if you were to become critically ill with illnesses such as:
- Cancer
- Heart Attacks
- Strokes
The chance of suffering a serious illness is significantly higher than passing away. Because of this opting to add Critical Illness Cover to your policy will results in a severe hike in your monthly premiums.
Including A Spouse Increases The Cost
When it comes to taking out a Life Insurance cover you can protect two lives on one policy, however this can be 80% more expensive than a single policy.
It’s also important to remember that it will only pay out on the first death. This means that the remaining policy holder would no longer be covered by life insurance once the claim has paid out.
Because of this it might be worth considering taking out 2 separate policies to ensure both parties are fully covered, however this would be a more expensive option.
Choose Your Premiums Wisely
When choosing a Life Insurance policy you will have the option of opting for reviewable or guaranteed premiums. There is a significant difference between the two and the cost of a policy will vary depending on which one you choose.
- Guaranteed Premiums
Usually are more expensive compared to reviewable when taking out a policy. This is because monthly premiums remain fixed over the term of the policy.
- Reviewable Premiums
These tend to start off cheaper, however the total cost is usually higher over the life of the policy relative to plans with guaranteed premiums.
Personal Factors Affecting The Cost Of Life Insurance
When it comes to putting Life Insurance in place there are a number of personal and policy factors that will affect the amount you pay. We’ve outlined these below.
Age Can Affect The Cost Of Life Insurance
As unfair as it may seem, age does affect the cost of Life Insurance. This is because sadly, with every year we get older the more at risk we become to certain health conditions.
As a result of this insurers charge a higher premium for older people, this is due to the fact they are more likely to make a claim than a younger person.
Using the same policy options for Decreasing Term Life Insurance, the cost of Life Insurance for our 30 year old goes from £6.24 to £12.77 for a 40 year old.
Smoking Can Cost You A Packet
It will probably come as no surprise that if you are a smoker you will be charged more for Life Insurance.
This is because most insurers will put you in a higher risk category compared to non-smokers in terms of developing certain health conditions. To offset this higher risk, a smokers premiums will be increased.
If I Give Up Smoking Will My Premiums Go Down?
Yes. The good news is that if you can prove you have been nicotine free for the last 12 months, most insurers will re-evaluate your status and change it to a ‘Non-Smoker’. As a result of this your premiums should go down.
Pre-Existing Health Conditions Can Affect Your Premiums
When it comes to putting Life Insurance in place, insurers will look at your medical history to determine what cover they can offer, if any, and at what cost.
If you do have a known pre-existing medical condition which is life-limiting or that affects your health, providers will tend to:
- Provide cover but with increased premiums
- Exclude the condition you suffer from but offer discounted premiums
- Cover you without any exclusions and no premium loading.
If you have a pre-existing condition it’s best to speak with an expert, such as one of the team here at Drewberry to ensure you’re getting the best policy for your circumstances.
You can pop us a call on 02084327333 or email help@drewberry.co.uk.
Do You Partake in Extreme Sports?
If you are an adrenaline junky and take part in hazardous hobbies such as base jumping or volcano boarding (yes that’s an actual thing), you could find yourself paying higher premiums. This is because insurers will class you as higher risk than someone who takes part in less extreme sports and could charge you up to 25% more.
Hazardous sports which you can expect to increase your premiums include:
- Big wave surfing
- Off-piste skiing
- BASE jumping
- Kiteboarding
- Free climbing
- Scuba diving
- Hand gliding
As each provider will class hazardous sports differently its always best to review the whole market before taking out Life Insurance. It can be quite confusing when comparing different providers so its best to speak to an expert such as one of the team here at Drewberry.
Just pop us a call on 02084327333 or email help@drewberry.co.uk.
