Life insurance cheapest for nine years

This crucial form of protection is getting cheaper, but it may not last...

Life insurance is a vital expense for many of us, ensuring that should the worst happen, our loved ones will not suffer as a result. What’s more, it’s now at its cheapest level in a whopping nine years!

Back in 2009, if a 30-year old male non-smoker wanted cover that would pay out £200,000 to his surviving family should he die in the following 20 years, he would have been looking at monthly premiums from £10.05.

By last March, the premiums had fallen to £9.72, a fall of 33p a month, meaning life insurance was at its lowest level in eight years.

And today, once again premiums have fallen – this time by a far more substantial margin.

Seriously cheap life insurance

If a 30-year old male non-smoker took out a 20-year policy today paying a lump sum of £200,000 to his loved ones, the cheapest premium would be just £8.95 a month. That’s a fall of 77p over the past 12 months, and a whopping £1.10 a month since 2009.

Indeed, it’s not just 30-year old male non-smokers (a fairly small subsection of the population!) who have seen life insurance premiums plummet – according to research by Sainsbury’s Finance, premiums have fallen for three-quarters of us over the past 12 months!

A competitive marketplace

One of the main reasons that premiums are heading downwards is the sheer level of competition in the marketplace now. There are just so many firms competing for business that it’s almost inevitable that they will have to undercut each other in order to attract business.

When I used lovemoney.com’s life insurance comparison engine for the example above, I found nine different insurers who would be willing to provide cover for less than £11, a pittance really.

What’s more, the fact that we are all living for longer means that insurers are not having to pay out on policies as often. That will continue to push premiums downwards in the coming years.

Keeping premiums cheap

Now, you may be sat on an existing life insurance policy which is charging you far more in monthly premiums, and fancy switching to get a better deal. Good on you. But it’s not just about shopping around – there are other, more subtle things you can do which will see your premiums fall.

For example, if you have given up smoking but not told your life insurer, you’ll most likely be paying more than you need to. Or maybe you and your partner have separate life insurance policies, and could save up to 25% by going for a joint policy.

Jane Baker explains why life insurance should be your number one financial priority

For a list of great tips on how to lower your bill, have a read of Seven steps to cheap life insurance.

Why cheap is not always best

However, as with all forms of insurance, it’s best to keep in mind the bigger picture – namely the payout your loved ones will receive should you pass away. Sure, you could cut your monthly premiums by a few pence by reducing how much cover you have. But is it worth it if that then means that your partner or kids have to scrimp and save just to get by?

Personally, if I kick the bucket ahead of schedule, I want to know that my wife and son will be comfortable financially, not simply have enough to get by, so I’m more than happy to pay a bit extra each month.

Besides, when picking a policy it pays to look beyond the headline rate to see exactly what you’ll be getting for your money. For example, some policies offer all sorts of extras, like counselling, medical advice, or additional critical illness cover for your children. Be sure to check out Don’t miss out on these secret perks for a full run-down on some of the great extras you can get on top of your policy.

Bad news for women

However, premiums are likely to start heading northwards for women within the next two years, thanks to our European cousins.

The European Court of Justice last week ruled that it was discriminatory for financial companies to use gender when pricing up products. And while much of the focus since has been on car insurance and pensions, life insurance will also be affected.

As things stand, women tend to have smaller premiums than men, for the simple reason that on average men don’t live as long as women, and so are more likely to die within the term of life cover and so require a payout.

However, that will have to change – all in the name of fairness and equality you understand. And don’t kid yourself that the life insurance providers will cut premiums for men so that both sexes are charged the same. Instead, women will see their premiums jump to the levels their male counterparts pay.

The experts reckon that we are likely to see a turbulent few months in the life insurance market, as some providers try to revamp their pricing ahead of the deadline of December 2012 for eradicating such gender discrimination in their product pricing. As a result, if you’re planning to take out a new policy, or shop around for a better deal, it’s a good idea to do it now rather than wait for the inevitable price rises yet to come.

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