Choose the right type of cover and the right term and you can save thousands

Choose the right type of cover and the right term and you can save between £5000 and £33,000 over 20 years. This is down to you, an agent or adviser can help, but this one is on you. The main thing to consider is what is the reason for the Life Insurance and what will the money be used for. If it is for funeral expenses you probably want to insist on a whole of life insurance policy – these typically pay less commission to the agent than term policies so you might need to ask specifically for a whole of life quote. Whole of Life Insurance means you are covered until you die, regardless of how long you live for. As you are looking for your funeral to be covered and no-one knows when they are going to die, whole of life is the only way to guarantee a pay out.

If on the other hand you have young children and you want to make sure that should the worst happen your kids don’t suffer financial hardship, then you probably need a term Life Insurance policy. This is much, much cheaper then whole of life insurance. For example, let’s say you are a 42 year old and you have two kids aged 5 and 7. You need Life Insurance as you know if anything happens to you there will be a huge reduction in the household income and possibly an increase in childcare costs. You still need the roof over their heads, food on the table and clothes on their backs, so they will need financial help to avoid being forced to move house and rely on state help.

So let’s you say you think £200,000 will get the mortgage paid off and leave some money behind to ensure they don’t suffer financially. On a whole of life basis this will cost you at least £156 every single month. Or, you can get a lower cost term policy to age 90 for a much more reasonable £37 per month. But, wait a second, the reason for the cover was for your young kids aged 5 and 7 to make sure they don’t suffer financially, right? So when your 90 years old, your kids will be in their 50’s…..older than you are right now! The mortgage will be paid off and the kids will (hopefully) be earning their own money by then and buying their own food and clothes.

So let’s look at matching the term to the reason you need the cover in the first place……think roughly what age will your kids no longer be financially dependent upon you. Even play it safe a little, say when they are 25 and 27. Okay so we can look at a 20 year term, meaning if anything happens to you while the kids are financially dependent on you, there is £200,000 to help them out. This brings the cost down for the same level of cover to only £15.99 per month.

Total cost over 20 years for the £200,000 of cover:

Whole of Life = £37,440
Term to 90 = £8,880
20 year term family protection = £3837.60 (£33,602 saving on Whole of Life and £5042 saving against term to 90)

That’s a pretty big saving and money that you can spend on enjoying life!