How to lower your life insurance premiums

What to do if you’re looking for cheaper life insurance

Life insurance is a policy that promises to pay out a cash benefit to your loved ones if you die unexpectedly. It’s one of the most common forms of insurance worldwide, accounting for 45% of all insurance premiums. Around 52% of people living in the USA have taken out a life insurance policy.

Having said that, the cost of life insurance can be a significant expense. Around the world, the cost of life insurance is increasing as the cost of living crisis continues to bite. In the UK, the cost of life insurance is around £8/US$10 per month for every £100,000/US$125,000 of cover. So, for a £500,000/US$630,000 policy, one individual could expect to pay £40/US$50 per month. That adds up to £480/US$600 per year.

Life insurance can be a difficult pill to swallow. After all, whether or not you die, you won’t get to see the benefits yourself. And while it’s important to remember that life insurance is there to care for your family and loved ones after you’re gone, it’s not worth stretching your financial resources too far while you’re still alive – especially if it stops you living life to the fullest.

That’s why many people look for ways to get the lowest price possible on their life insurance cover, while still retaining the best possible benefit. The good news is there are plenty of ways you can go about doing this. We take a look at some tips to help you get lower life insurance premiums.

How are life insurance premiums calculated?

Before we get into the tips, it’s important to understand how life insurance providers work out your premiums.

The key word here is ‘risk’. When working out your premiums, your insurer will determine how likely you are to die during the term of your policy, and how much this might cost them. This is the ‘risk’, and the higher a risk you appear to pose, the more your premiums will be. This is so the insurer is better poised to offset their losses if you pass away during the term of your life insurance.

Lowering your life insurance, therefore, is about demonstrating to your insurer that you pose less of a financial risk to them.

When it comes to getting lower life insurance rates, you will need to show your insurer that you can make changes in one of these three areas. In other words, you can:

• Lead a healthier lifestyle, for instance by stopping smoking or losing weight
• Reduce the number of risky activities you do, or choose a less dangerous occupation
• Choose a lower cash benefit

Let’s look at these options in more detail.

1/ Try to live a healthier lifestyle

When you take out a new life insurance policy, you will typically be asked a series of questions about your lifestyle. Depending on how you answer these questions, your insurer will make a judgement about your risk based on your daily and weekly habits. If you seem to lead a less healthy lifestyle, your insurer will class you as higher risk, and your premiums will end up being higher.

Thankfully, the opposite is also true. So, if you can demonstrate that you lead a healthy lifestyle, you may be able to lower the cost of your life insurance.

Here are some basic things you can do to not only improve your health, but also potentially lower your life insurance premiums too.

Quitting smoking

From a life insurer’s perspective, smoking is one of the biggest red flags when it comes to insuring your life. Smoking is linked to a number of diseases, including heart attack, stroke, cancer and emphysema and contributes to eight million deaths worldwide every year. Smokers live, on average, 10 years less than non-smokers.

If you smoke, it’s likely your life insurance premiums will be higher, as there is a much higher risk you will contract a serious illness during the term of your policy. On the other hand, quitting smoking has been found to seriously reduce your risk of developing a smoking-related illness. If you quit before 40 years old, you could reduce your risk of contracting illness by up to 90%.

Quitting smoking is good for your finances generally, but if you can also demonstrate to your life insurer that you no longer smoke, it’s more than likely it will help to reduce your premiums.

Losing weight

When assessing your life insurance policy, your insurer will look at your height and weight (relative to your gender and the amount of physical activity you do) to work out the risk associated with your BMI. If you are overweight, your premiums may be slightly higher. If you are obese – especially if you have a BMI of 40+ – it’s likely your premiums will be considerably higher.

Obesity is linked to a variety of health issues including high blood pressure, type 2 diabetes, stroke and cancer. Moderate obesity can lower your life expectancy by three years, while morbid obesity can reduce your life expectancy by as much as 10 years.

Losing weight can therefore help to lower your risk of a premature death, which will also help to reduce your life insurance premiums. If you can get your weight down to a healthy level (typically 18.5–24.9), your insurer is likely to consider you a lower risk, and may therefore offer you a lower premium.

Consuming less alcohol

Your insurer may also ask about your regular alcohol consumption. Not only has long-term consumption of alcohol been linked to various health diseases, including cancer, stroke, high blood pressure and dementia, short-term alcohol use is also linked to a higher risk of injury and accidental death.

Therefore, the more you claim to drink on a regular basis, the higher your risk profile will be. Reducing your alcohol intake, or abstaining entirely, will therefore help to demonstrate that you pose less of a risk, which will benefit your life insurance premiums.

As a benchmark, the US National Institute on Alcohol Abuse and Alcoholism defines moderate alcohol use as 2 drinks a day for men and 1 drink a day for women. Heavy alcohol use is defined as consuming more than 4 drinks a day/14 drinks a week for men, and 3 drinks a day/7 drinks a week for women. If you tend to drink around, or over these limits, you may wish to consider cutting down for the benefit of your life insurance premiums.

2/ Take part in fewer risky activities

It’s sometimes hard to define what counts as a risky activity. After all, crossing the road can be very risky, but it’s something we all do every day! However, your life insurer will be on the look-out for two types of risky activity especially:

1. Taking part in sports that carry a higher than normal risk of death or serious injury
2. Having an occupation that exposes you to risky situations

There are many other examples of dangerous activities and occupations that may raise your insurer’s eyebrows. As a rule of thumb, working mainly in an office environment and participating in low-risk activities such as working out at the gym are considered to be the lowest-risk categories.

While your insurer won’t want to suggest you give up your hobbies or leave your job, you may be better off shopping around for specialist insurers. They may offer life insurance policies tailor-made for people who lead similar lifestyles to you, and may therefore be able to offer a better price.

It’s also worth mentioning there are certain activities and occupations that may exclude you from being able to take out life insurance. This may include working for the military or emergency services, being a professional daredevil, or taking part in extreme sports such as BASE jumping.

3/ Choose a lower level of cover

When taking out a life insurance policy, you are free to decide how much you’d like to insure your life for. If you die during the term of your policy, your family, loved ones and beneficiaries will each receive a share of your benefit.

There are a few ways you can lower your premiums by making a few adjustments to your policy. Let’s go through them.

Opt for a lower benefit

Naturally, the less you insure your life for, the lower your premiums will be.

When deciding on a life insurance benefit, it’s important to remember that your pay-out may go towards paying unpaid bills (such as your mortgage), the cost of your funeral, and any ongoing expenses such as school fees and medical bills. It’s important not to under-insure your life, as any debts you leave outstanding may need to be paid by your family.

At the same time, it’s important not to over-insure your life. While it is a nice idea to leave your family well-off after you die, this shouldn’t come at the cost of over-paying your premiums while you’re still alive. When taking out a life insurance policy, your priority should be to ensure your family will have enough money to get by without you.

Remove optional extras

Another way to lower the cost of your premiums is to opt out of additional benefits.

For instance, at William Russell, we offer an additional level of cover called an accident benefit. This promises to pay out an additional benefit (up to US$500,000, and no greater than the sum of your life insurance benefit) if your death is the result of an accident.

You (the policyholder) can also collect your accident benefit early if you survive the accident but experience permanent disablement. In this situation, the benefit will pass directly to you rather than your named beneficiaries.

This additional level of cover is entirely optional. While it could offer your family a little extra in the event of your sudden and unexpected death, it will also add an additional premium to your regular payments. You are free to opt out of the accident benefit, and you will still have life insurance.

What else can you do to lower the cost of life insurance?

There are several other ways to help you get the best price on your life insurance. These options may not apply to everyone, but they may come in handy for you.

1/ Take out your policy while you’re younger

Insurers take on more of a risk when they offer life insurance to older people, which is why your premiums will become more expensive with age. If you take out your policy while you’re younger and stay with one insurer throughout your life, you may be offered a better rate later in life. On the other hand, if you take out a new policy when you are older, you may find that your premiums are higher than expected.

2/ Compare multiple providers

Whether you’re taking out life insurance for the first time or thinking about switching, it’s a good idea to compare multiple different insurers. Different insurers have different risk profiles, which means you may be offered a better price with an insurer more suited to your individual needs and lifestyle. Be sure to get a quote from a number of different insurers before settling on one price.

3/ Stay insured

If you cancel your life insurance policy or fail to renew it, and later decide you’d like to take out life insurance again, you may find your premiums higher the second time around. You may also need to go through underwriting again, which could mean more medical questions, no cover for pre-existing conditions covered by your first policy, and possibly undergoing another medical assessment. It’s always preferable to try to lower your life insurance premiums while you’re still insured, rather than cancelling and restarting.

4/ Stay in one type of profession

Some insurers may look unfavourably upon your policy if you regularly change jobs or occupation types. Staying in one line of work, especially if it’s a low risk category, will help to ensure your risk profile stays low and that your insurers can continue to offer you the best price.

5/ Live in a safe country

Certain countries are known to be riskier than others. Whether because of the threat of armed conflict or natural disasters, animal attacks or political turmoil, it can be more expensive to insure your life in some countries. At William Russell, while our policies cover you worldwide, the price we offer will be determined based on your main country of residence. There are also several countries we cannot cover you in if you are a resident there, or in which you die while travelling as a result of conflict or terrorism. These are typically countries that the British Foreign & Commonwealth Office advises its citizens to leave or not to travel to, and include Iran, Libya, North Korea, South Sudan, Syria and Yemen.

6/ Pay annually

Another simple way to save money on the cost of your life insurance is to pay for your premiums annually. At William Russell, paying annually is the cheapest option. If you choose to pay half-annually, we will apply a 3% surcharge, and if you choose to pay quarterly or monthly, a 5% surcharge is added.

Notes on our life plans

We show the benefits on this webpage in US dollars, but we can also denominate your policy in pounds sterling or Euros. You won’t find complete information for our plans on this webpage, nor the full T&Cs, limitations, and exclusions that would apply if you purchase a life insurance policy. You can find complete information in the plan agreement, which we suggest you read together with this webpage. We work hard to ensure the information we provide on this webpage is accurate and up-to-date, but inaccuracies are possible. We rectify errors as soon as we become aware of them. The T&Cs that apply to your policy are those found in your plan agreement.