How can I reduce my life insurance premiums?

6 min Read Published: 18 Jun 2024

In this article, we explain the different ways to reduce your life insurance premiums that you may not have considered. Life insurance that covers you for a term will only pay out if you die within the term so it makes sense to ensure that you're not paying more than you need to. We will show you how to understand how your life insurance premium is calculated and many ways to save money on life insurance.

Top tips for reducing your life insurance premium...

  • Check that you're covered for the right amount of life insurance
  • Check that your life insurance covers you for enough years and not more than you need
  • Check that you're not paying for the wrong type of life insurance policy for your needs
  • Improving your health, losing weight and giving up smoking can all reduce your life insurance premiums
  • Consider buying separate policies instead of a joint life insurance policy covering the appropriate amount for each person individually
  • Speak to a life insurance expert*  to discuss all of these tips as well as search the whole market for the cheapest price

How can I reduce the premiums on my life insurance?

The premiums on a life insurance policy as well as other personal insurance policies such as critical illness cover and income protection insurance are set using a number of factors such as:

  • age
  • health
  • lifestyle
  • smoker status

These factors may result in your life insurance premiums being expensive and outside of your budget. But rather than just giving up, there are certain things you can do to reduce your life insurance premiums but do remember that the cheapest life insurance policy isn't always the best. Sometimes the differences between policies are hidden away in the terms and conditions which can be difficult to understand without the help of a life insurance expert on your side.

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Compare life insurance quotes from different insurance companies

Each insurance company will have its own method of assessing the risk of the person whose life is to be insured. Certain medical conditions, hazardous pursuits or even jobs can make your life insurance monthly premium cost more than you could pay with an insurance company that will assess you more leniently. This can result in different premiums for the same cover so it pays to shop around and compare your life insurance by speaking to life insurance experts* who understand how each insurance company assesses your risk.

If you are arranging a mortgage, for instance, you do not have to take life insurance out with the company that your mortgage broker is tied to as that life insurance company may not be the best or cheapest for you and it is unlikely that your mortgage broker will tell you this. You can read more in our article, “Should you buy life insurance through a mortgage broker?“.

Select the right amount of life cover

If you can accurately calculate the amount of life cover you require then this can help to keep the cost to a minimum. Take stock of your personal finances and consider if you want to cover your outstanding mortgage and debts like credit cards; replace a lost income; pay taxes such as inheritance tax against your estate or just cover funeral costs? Assigning priorities can also help you to work out which aspects of what you need are more important to you. The amount of life insurance you buy will affect how much you pay for it so if you can reduce your life insurance, your life insurance premiums can reduce. Our article ‘How much life insurance do I need‘ will help you to work out whether you have chosen an appropriate amount of life insurance for your particular needs.

Reduce the term of the life insurance policy

The longer the term of the policy the more expensive the premium will be. Maybe just insure for the remainder of your mortgage term or while your children are young, as any reduction in term will keep your premiums down.

Choose the right type of life insurance

The price for your life insurance, in large part, depends on the type of life insurance you select. Some types of life insurance are cheaper than others and may be suitable depending on your circumstances. An increasing policy will increase in cost each year so think carefully about whether you need this – could a level term assurance policy be sufficient? Consider buying a life insurance policy where the lump sum that is covered reduces during the term of the policy. This type of policy is typically used to cover a repayment mortgage where the death benefit reduces in line with the outstanding mortgage balance and is cheaper than a level term assurance policy. There are specific family life insurance policies that also reduce over time and can give you more life cover while your children are young, reducing as they get older and closer to being financially independent.

If you're able to pay your life insurance premium annually to try and save some money, enquire with your life insurance company as to whether it offers a discount on an annual premium.

Consider single policies rather than a joint policy

If you are looking to get life insurance for both you and your partner often a joint life insurance policy is used, however, this might not always be the best option. A joint life insurance policy pays out on the first death if this occurs within the term of the policy. This means that both partners are insured for the same amount which may not always be the best option. If, for instance, one partner has a lower income than the other it might make sense, from a cost viewpoint, to cover that partner for a lower amount. With two single life insurance policies, you will have two separate policies that will both pay out in the event of both partners dying within the term of the policy, not just when the first person dies as with a joint life insurance policy offering you better value for money.

When you obtain quotes for life insurance it always makes sense to get quotes for both single and joint-life insurance policies and compare the cost. Don't forget there is nothing stopping you and your partner from having life insurance policies with different insurance companies as don't assume one insurer will offer the best value for both of you.

Improve your health

When you apply for term life insurance you will be asked to complete a health and lifestyle questionnaire. If you smoke or are overweight your life insurance premiums are likely to be increased due to these factors. It follows therefore that if you quit smoking and lose weight your life insurance company may consider reducing your monthly premiums.

These changes do not happen overnight as companies will require you to be a non-smoker for a period of time (usually a minimum of 12 months). But if you can make these lifestyle changes you could then approach your current insurer or get a quote from others to see if you can reduce your life insurance premiums. Likewise, if you had health concerns when you applied for your life insurance that you've since recovered from, you may be able to shop around for cheaper life insurance.

Check your employee benefits

Many companies offer life insurance cover as part of their employee benefits, usually referred to as death in service benefits so make sure you are aware of what life insurance cover may be available without the need to pay for it. Typically the cover provided is a multiple of your annual salary and this can be a significant level of cover and may reduce the need for additional life cover. One word of warning, however, if you leave your current employment then your life cover will usually cease unless, of course, you can negotiate replacement life cover with your new employer.

How can I stop my life insurance premiums from increasing?

To stop your life insurance premiums from increasing, you'll need to address something called the ‘increasing option' within your life insurance policy. It can also be referred to as ‘index-linking'.

An increasing or index-linked option protects the value of your life insurance against inflation by increasing the sum insured each year. Your monthly payment will increase to reflect this too – mostly at a higher rate than your sum insured increases.

The increases are usually linked to the Retail Price Index (RPI), Consumer Price Index (CPI) or a flat rate that the insurance company decides.

When the inflation indices are low, your premium payment probably won't increase by more than a few per cent but in times of higher rates of inflation, you will find the increases become more significant.

To stop or pause the increases to your life insurance, simply get in touch with your life insurance provider and request this. Usually, you can decline an increase for up to three consecutive years before the insurer will remove the option from your life cover policy, making it a level-term life insurance.


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