Seven steps to cheaper life insurance

Life insurance is the cheapest it's been for years. Here are seven easy ways to reduce your premiums - before they go up again.

Now is a great time to buy life insurance. That's because cover is cheaper now than it has been for seven years. Hurrah!

(Come on, when was the last time you celebrated something as exciting as cheap life insurance?)

On a more serious note, even though costs have been cut back across the board, you'll still find the some life insurers offer far better value for money than the rest. So, take a look at these seven steps to help you pick the right life insurance policy:

1. Choose a cheaper plan

The type of plan you choose will have a huge impact on cost. The most widely sold policy is level term assurance, which pays out a lump sum if you die at any time during the policy term.

However, you can reduce your premiums by switching to a different type of policy.

One way to do this is to take out decreasing term assurance. This is often used to cover your outstanding repayment mortgage if you don't survive until the end of the policy. Just be aware that the amount of cover this policy provides reduces every month  in line with your mortgage, as you gradually pay more of it off.

Alternatively, you could opt for family income benefit. This provides your family with a yearly income from the time a claim is made until the policy expires. So if your family makes a claim 20 years before the policy expires, your family will get 20 years of payments. But if you live an extra 19 years, and your family only makes a claim a year before the policy expires, then your family will only get a single year's payment. That's why this policy often works out cheaper than a level term life insurance policy.

2. Buy separate policies

Once you've decided which type of policy you need, decide whether your partner needs cover too. If you both want protection don't be tempted to apply for a joint policy. Joint plans are only marginally cheaper than separate plans, but you can only claim once. After a claim is made the policy immediately stops leaving the surviving partner without any cover.

However, by choosing separate policies you will both be covered individually which means you'll effectively have double the cover in return for what is usually only a small extra cost.

3. Don't double up on cover

It's important you don't waste money by taking out more insurance than you need. You may have other policies in force such as death in service as part of your employment package. Remember to deduct this cover from the total amount you need. Use this calculator to help you work out the right level of protection for you.

4. Shop around

So, now you know what type of policy to go for and how much cover to buy, but there's really only one way to guarantee you get good value for money: shop around. I know you've heard it all before, but comparing quotes to find the most competitive insurer really is very easy, especially on our site. All you need to know is:

• the type of policy you want
• the amount of cover you require
• the term of the policy you require
• when you want to pay your premiums (monthly or yearly)

If you're not sure exactly how much cover you'll need, you can use our nifty life insurance cover calculator to check.

When it comes to pure life insurance, it's pretty safe to base the comparison purely on cost. However, if you want to add on critical illness cover, for example, the protection provided varies immensely from one insurer to another in terms of the number of medical conditions covered. Make sure you read the small print first to find out how comprehensive the policy is.

Compare life insurance quotes at lovemoney.com

5. Switch your existing policy

If you already have a policy, don't think all this doesn't apply to you. It does. Did you know you can switch your life insurance plan in much the same way as you would your energy supplier or broadband provider? Best of all, because life cover is cheaper now than it has been for some time, the chances are a new policy could be significantly cheaper.

That said, there are a few things to bear in mind before you change your policy:

• To avoid any gap in your protection don't cancel your old policy until the new one is up and running.
• Make sure you aren't giving up any special benefits on the original plan which aren't available on the new policy.
• If you're a lot older now than you were when you originally took out your policy, or your health has deteriorated in the meantime, a new policy could be a lot more expensive. If that happens, stick where you are.

6. Insure yourself?

If you really want to keep your costs down you could think about self-insuring. Quite simply, this means putting aside your own savings instead of buying protection. However, it would take a serious savings habit over many years to accumulate anywhere near the amount you would need.

I would suggest self-insuring against redundancy makes sense since saving say, three month's salary is an achievable target. But buying a low-cost life policy to provide thousands of pounds worth of protection for your family is a smart move.

7. Skip cover if you're single

Finally, don't waste money on life cover if you don't have any financial dependants such as a partner or children. If you're single, it's far more important that you insure against loss of income with a critical illness cover plan or income protection insurance. Read Peace of mind at the right price to find out more.

Compare life insurance quotes at lovemoney.com

More: Get the right life insurance for you | Life insurance cheapest in seven years