Rip-off insurance companies can cost you an arm and a leg. Find out how to get a good price for vital protection.
There's no question most insurance policies are far more complicated than they need to be. Thankfully, life insurance isn't one of them. As long as you keep paying your premiums, if you die during the policy term, your family will receive a payout. It's doesn't get much simpler than that.
Life insurance policies might all offer the same thing, but that doesn't mean that all policies are exactly the same. For example, the difference in price between the best and worst policies can be huge even if it looks pretty tiny on the surface.
So we're going to dig a little deeper and find out how much you could be out of pocket if you don't shop around. In the table below I've compared different policy types and looked at the best and worst price for each.
Bear in mind I've only included insurers which are available through the lovemoney.com life insurance service, which are pretty competitive anyway. If you compared every single insurer on the market, you would find the margin between the most competitive policy and the least is even wider.
Life insurance policies: best vs. worst
All premiums shown are for a man age 35, who needs cover over a 25-year term and doesn't smoke.
|
Policy type and amount of cover |
Best price £ per month |
Worst price £ per month |
Total saving over policy term by choosing the best policy instead of the worst |
|
Level term - £100,000 |
£8.22 |
£10.15 |
£579 |
|
Level term - £200,000 |
£14.64 |
£17.12 |
£744 |
|
Level term with critical illness - £100,000 |
£38.07 |
£40.12 |
£615 |
|
Level term with critical illness - £200,000 |
£73.23 |
£77.15 |
£1,176 |
|
Decreasing term - £100,000 |
£6.34 |
£7.87 |
£459 |
|
Decreasing term - £200,000 |
£10.43 |
£12.80 |
£711 |
|
Decreasing term with critical illness - £100,000 |
£22.83 |
£28.58 |
£1,725 |
|
Decreasing term with critical illness - £200,000 |
£42.37 |
£57.62 |
£4,575 |
I've compared premiums for level term assurance plans with and without critical illness cover. I've also done the same for decreasing term assurance.
In case you were wondering, level term assurance provides a constant amount of cover throughout the duration of the policy. Decreasing term assurance provides cover which reduces over time, and is therefore a lower cost option than level term.
As you can see, the cheapest level term policy which provides cover of £100,000 costs just £8.22 a month. Meanwhile, the most expensive insurer on our panel costs £10.15. Now that's a difference of less than £2 each month, which doesn't sound much, but over a 25-year term the total savings add up to £579 if you chose the most competitive plan.
It's a similar story for decreasing term assurance where the cheapest monthly premium for £100,000 worth of cover (£6.34) costs £459 less over the term than the most pricey (£7.87).
Critical illness cover
Critical illness cover provides protection against ill health and will payout if you're diagnosed with one of the conditions covered by the plan within the term you have chosen. But it's a more complex policy than life insurance because the range of conditions covered can vary from one insurer to another. For this reason you must be careful about comparing critical illness cover plans on the basis of cost alone.
That said, all policies provide a basic level of cover set out by guidelines from the Association of British Insurers (ABI). This includes these seven core conditions: certain types of cancer, coronary artery by-pass surgery, heart attack, stroke, kidney failure, major organ transplant and multiple sclerosis. Policies generally also cover a range of additional conditions as well as total and permanent disability.
How much more could it cost?
In theory it makes sense that the more comprehensive cover provided by some policies could account for the increase in price, but this doesn't necessarily follow in practice.
For example, if you took bought a £200,000 decreasing term policy with critical illness cover from the cheapest provider on our panel, you would be covered for a total of 35 different conditions at a monthly premium of £42.37. But the most expensive - at a cost of £57.62 a month - also covers just 35 conditions.
In other words, if you chose the most expensive policy, your cover would cost you a whopping £4,575 more over 25 years, but you would have no extra protection whatsoever. That's hardly money well spent.
So the moral of the story is, don't sign up for anything until you've read the terms and conditions thoroughly - so you know how extensive the critical illness cover on offer really is.
In fact, if you're after more tips on insuring your life and your health, you can join other lovemoney.com readers who are taking a shot at our Get the right type of life insurance goal. Just follow all the tasks outlined in this goal to help keep you on the right track. And, of course, don't forget to shop around using the lovemoney.com life insurance service.
But before all that, make sure you take a look at this video Why you need life insurance to find out whether you actually do!
Finally, if you have any more questions, why not ask the lovemoney.com community using Q&A.
Compare quotes at the lovemoney.com life insurance service
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