You can buy your life insurance through your bank if it's available but the question is, should you? Most of the major high street banks have relationships with an insurance company that provides life insurance for their customers. So, why not buy it directly through the insurance company?
Perhaps it's more convenient to buy your life insurance while you're in your branch doing your other bits of banking but wait! - how many of us have even been into the branch of our banks recently? Perhaps your bank has an app that will allow you to buy life insurance conveniently but will it help you to choose the right amount, the correct number of years and the best type of insurance? In this article, we look at whether you should purchase life insurance through your bank or whether you would be better off buying it elsewhere.
Is the life insurance you can buy through a bank good quality?
The quality of the life insurance will be determined by which insurance company your bank is tied to. You can look at the key features document for the life insurance that is on offer on the bank's website. The problem here is that there is little opportunity to compare the cover you are being offered. There are very few things that we buy these days without comparing the cost and features against other options available, so why would we do this with life insurance?
Banks are usually tied to one insurance company so they have one price for you. Different insurance companies have different guidelines for health, occupations and pastimes too. So what if it turns out that the insurance company that your bank is linked to is poor for your health, your job or the hobbies that you do? Is your bank going to end up costing you more?
A list of banks and the life insurance providers they are partnered with
|Barclays||Legal & General|
|Nationwide||Legal & General|
I'll be fair, the insurance companies in the above list are reputable providers of good quality insurances. If you decide to buy your life, critical illness or sick pay insurance with your bank, you'll probably end up with a decent product. However, you might find it cheaper elsewhere or you might find that a different insurance company will provide additional benefits.
The worst-case scenario has got to be a situation where someone has applied for life insurance with their bank, been declined and assumed that they're uninsurable. This is usually not the case, in fact, there are several instances where one insurer may decline your application but another will happily accept it, usually at an increased cost.
Often, the more niche providers won't be affiliated with a bank but they might have the perfect solution for you at a good price. So, I would suggest that instead of buying your life insurance from your bank, you speak to a specialist life insurance broker* who has access to the entire market and will guide you to the best price and product for you.
Is it cheaper to buy life insurance with your bank?
In most cases, no. Your bank won't shop around for you and so the price you are offered may well be significantly higher than the cheapest policy on the market. If you have a health condition to disclose, it's very likely that your bank will not anticipate the price increase that this will cause, let alone know how to avoid it. It goes back to the fact that the bank is tied to one insurance company and so they have no other option to offer you.
We know that insurance companies have different guidelines for things like health issues, risky jobs, family history of health and dangerous hobbies. It would be by absolute chance that your bank would be partnered with an insurance company that offers the best price and guidelines for your particular circumstances.
I did this for myself and checked to see how much my bank would charge me compared with the quotes I could get through a specialist life insurance adviser* and the results were surprising, even to me.
Life insurance price comparison: Best quote from my Bank vs Best quote from an independent specialist
|43 year old non-smoker||Amount of Level Life Insurance||Term of Life Insurance||Monthly Price|
|Scottish Widows through my Bank||£250,000||20 years||£34.37|
|Scottish Widows through a specialist life insurance broker||£250,000||20 years||£20.72|
|Cheapest price through a specialist life insurance broker (Vitality)||£250,000||20 years||£18.44|
If I decided to buy life insurance through my bank in the example above, I would be paying an extra £15.93 per month, which means I'd end up paying over £4,000 extra over the policy term. It won't surprise you to know that I didn't buy life insurance through my own bank and I'd urge you to consider getting independent advice before you do the same.
What's the alternative to buying life insurance through your bank?
Banks may have staff who specialise in talking to you about life, critical illness and sick pay insurances and this is helpful, but it remains a fact that even the specialist bank staff only have access to one product so it's a little bit like 'all roads lead to Rome'. Rome can't offer us all that we want and need. Personal insurances are exactly that; they're personal, therefore one solution doesn't suit every person. Speaking to a specialist who will listen to your wants and needs is key as they can match you to the product that is the best value for money.
At Money to the Masses, we look for organisations that we ourselves would buy from. Where we know we'll be given good information and choices to suit our personal request. Having looked at the market, we have found a company where its advisers are specialists in personal insurance and cover a wide spectrum of requests. They know how to find solutions for simple family and mortgage insurance needs right through to complex business insurance. They have expertise in understanding poor health, risky jobs and how to save tax on any payouts that your family may receive. You can arrange a conversation with an adviser at no cost and there is no cost for the service - you only pay for the insurance that you agree to buy. Simply complete this form* and an adviser will contact you at a time that is convenient for you. Additionally, you'll qualify for up to £100 cashback if you decide to take out a policy.
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. The following 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 - LifeSearch