Most people buy life insurance once or twice during their lives making it difficult to understand how much is reasonable to pay for it. While comparison sites and television adverts tell you that you can pay as little as a fiver for peace of mind, in reality, you will find that how much you pay for life insurance varies according to your needs and circumstances.
In this article, we will tell you the factors that affect how much you pay for life insurance; what you should consider before you buy and the best way to work out how much you should pay for life insurance.
How much should I expect to pay for life insurance?
There are a number of factors that affect how much you pay for life insurance, some of these are fixed but others can be tailored to help you find a cost that you are comfortable paying.
Life insurance details that affect what you pay for life insurance
- Type of life insurance (level term life insurance, whole of life cover, decreasing term life insurance, funeral plan)
- Amount of cover
- Period of cover (term)
- Extra benefits such as critical illness cover
Term life insurance is cheaper than whole of life insurance because there is a good chance that you will live beyond the term (number of years) of the policy and the insurance company won’t end up paying a claim. However, it is a very cost-effective life insurance solution for covering a mortgage debt or protecting your family while you raise children as the time period is limited to a set number of years.
On the other hand, whole of life cover will eventually pay out because it covers you until you die whenever that may be, making it more expensive. Although it could be tempting to choose whole of life cover, do remember that the payments for this type of life insurance will usually continue beyond retirement when your income may be reduced.
It is vital to understand which type of life insurance you should buy to suit your needs so you don’t pay more than you need to for life insurance. We will share how to do this later in this article.
Personal details that affect what you pay for life insurance
- Age
- Smoker status
- Health
- Occupation
- Lifestyle
Average cost of life insurance - £300,000 level life insurance over 20 years
| Age of applicant | Monthly premium^ |
| 25 | £6.28 |
| 35 | £11.69 |
| 45 | £24.51 |
| 55 | £66.71 |
^premiums assume that the applicant is in good health and does not smoke
Do bear in mind that a life insurance quote will only consider your age and your smoker status. What you eventually pay - the real cost of your life insurance - will be determined after you complete your application forms and once the insurance company has assessed your health and lifestyle. The average life insurance cost above will be different depending on your personal information.
If you have suffered poor health you can expect to pay more for your life insurance than someone who hasn’t, but there are ways to minimise the effects of your health history on your monthly premium. Likewise, your occupation and lifestyle can increase the cost of your life insurance too.
Speaking to a specialist life insurance adviser* can help you to avoid unnecessarily increased premiums.
How to work out what you should pay for life insurance
Life insurance cover is a way of ensuring that there will be some money - usually a lump sum - to pay for things like your funeral expenses, loans, interest-only mortgage, repayment mortgage, inheritance tax and the cost of living for those left behind.
Prioritise
The financial protection that you need will be relevant to your personal circumstances and prioritising what financial affairs you would like to cover in the event of your death will help you to tailor how much cover you choose. For example, you may wish to prioritise your debts and the loss of your income to your household over things like money to pay for your children to go to university.
Plan ahead
It is worth considering how long you will pay your life insurance premiums and looking ahead to check that you will be able to continue to pay for your life insurance if your income changes. A career break to raise children or a change to your working pattern could alter your income and in turn your affordability.
Life insurance costs more as you get older so you should try to choose a monthly payment that is easily affordable over the long term to prevent situations where you have to change your life insurance because your affordability changes.
Speak to an expert
If you choose life insurance to cover all of your needs and this works out at a monthly premium that is affordable for as long as you need life insurance, this is ideal.
However, if the life insurance that you feel you need costs more than what you can afford then you should speak to a specialist life insurance adviser* to tailor your life insurance to what you can spend. For example, there are cheaper life insurance policies available to cover repayment mortgages and some insurers will charge less for people with certain medical conditions.
The advisers have expert knowledge regarding health, occupations and lifestyle differences so they are able to recommend the insurance companies that offer the best rates. Looking at price comparison sites, you'll find that the initial life insurance quote may be slightly more expensive with an insurance company that will actually end up being the cheapest once your application has been assessed.
As a Money to the Masses reader, you'll also get up to £100 cashback if you buy your life insurance this way.
If a link has an * beside it this means that it is an affiliated link. If you go via the link, Money to the Masses may receive a small fee which helps keep Money to the Masses free to use. This link can be used if you do not wish to help Money to the Masses and do not wish to qualify for the cashback referred to in the article
