Switch your life insurance policy - quick!

Here at lovemoney.com, we're always banging on about the importance of getting life insurance. But for those who already have it, now is the time to switch and save.

Thinking about your own death may not be the nicest of topics – but if you have loved ones that depend on you financially, then you are putting them at risk by not getting life insurance.

But if you’re one of the wise people who already have a policy in place, how can you be sure that you’re getting the best deal?

Life insurance has got significantly cheaper recently, so you could be paying more than you should for the same cover. Plus, if it's been a while since you arranged your policy, you may find that your needs have changed and a new plan offers you better protection.

Today, I'm going to look at how much you could save by switching policies, and weigh up the pros and cons.

Level term cover

Level term cover gives you a guarantee that your beneficiaries will receive a set amount of money as a lump sum if you die within the term of the policy.

Here are the current rates, based on £150,000 of cover for a 25 year old non-smoker (as of 26th November). The market-leading rate for each person is highlighted in bold.

As you can see, level term premiums can start from as little as £6.12 a month for £150,000 of cover. I think this is a bargain price to pay for the peace of mind of knowing that your family will be looked after if you pass away.

How much do you pay for your policy? If it's more than the rates stated here, you could save yourself hundreds by getting a new quote. Head over to the lovemoney.com life insurance centre now to get a personal one made up in minutes.

Mortgage assurance

Mortgage life assurance is designed to protect your loved ones from paying off the rest of your mortgage if you die within a set term. The premiums are cheaper than level term cover because the amount of cover you get reduces over time as you pay off more of your mortgage debt. 

This is the most important type of cover to get because it guarantees that your family won't be thrown out of their home when you die. But if you set it up to cover only the mortgage, be aware that means your family is getting the absolute minimum level of cover - it won't provide them with any money for anything else.

Here are the current rates based on an initial sum of £150,000, which will decrease over a 25 year term. Again, the market-leading rate for each person is highlighted in bold.

As you can see, a 30 year old woman could get cover for a £150,000 mortgage for 25 years for just £5 a month.

It's likely that your mortgage provider offered you this type of assurance policy when you took out your mortgage. If so, check what you are paying as such policies are usually very over-priced. In fact, even if you shopped around for cover at the time, if it's been a while and you haven't reviewed your cover since you got your mortgage, then you can probably cut your premiums. Use the life insurance centre now to get a new quote and see for yourself.

Not sure whether it's the best option for you? To find out more about mortgage assurance, read The most important reason to take out life insurance.

Get the right type of life insurance

Getting the right type of life cover is even more important than getting cheapest cover – and will also save you money. The first thing to think about when getting a quote is the size and length of the policy.

A higher pay out will increase your premium – so tot up the exact amount you need to pay off any debts and provide for your family and take out an appropriately-sized policy. If you’re after level term cover but already have mortgage assurance then bear in mind it may be cheaper to ditch your other policy and just get one level term policy to cover the mortgage as well. Compare quotes and do the maths so you can make an informed decision.

Unfortunately, the longer the period of time you're covered for, the higher your life insurance premiums will be. If you’re taking out a policy to protect your children then it's best to make sure it lasts until they will no longer be financially dependent on you. If you’re covering your partner, you might want to ensure the policy will last until they’re entitled to a pension or have paid off the mortgage.

Keeping an eye out for renewable cover is also a good idea, as this will often allow you to continue with your policy at the end of a term without a further health check - which will keep your premiums lower at a time when you're likely to be in poorer health.

Finally, make sure you check whether your premiums are guaranteed or reviewable, as if you have the later the provider can increase your payments at regular intervals.

Risk = high premiums

The higher the chance that you’ll die within the term of the cover, the more you’ll pay in premiums. This means age, sex, having a risky occupation or hobby, being a smoker and general health with affect your policy greatly.

Insurance companies class you as a non-smoker if you have been tobacco free for 12 months. So if you ditched the smokes over a year ago, get another quote now as it is likely to be a lot cheaper!

Likewise, if you’ve recently given up your long time hobby of shark-diving or decided to quit your job in the bomb squad – get a new quote!

But remember, you have to declare every health issue in a life insurance application – as if a provider finds out after you die that you’ve bent the truth in any way, they won’t pay out.

A word of warning

Always make sure you have a new policy in place before you ditch your existing policy. Otherwise, you could have a gap between periods of cover.

As I said at the start, there's no doubt that life insurance is a pretty boring thing to think about. But it's even more boring to spend money on it when you don't have to, especially when you consider it only takes a few minutes to get a quote. Head over to the life insurance centre now to find out if you can save hundreds of pounds!

For more about life insurance read How you’re jeopardising your financial future or Seven steps to buying life insurance.

More: 5 days to financial disaster 5 people who need life cover