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Life insurance pays out a lump sum when you die in return for a monthly premium that you pay. The cost of life insurance depends on lots of different factors, including your age and health and also the amount of money you want it to payout ultimately. There are ways to cut the cost of life insurance while still buying a policy that suits you and your family. Here we look at how it works and how to find an affordable policy.

Where to start

Before you look at ways to find the cheapest policy, the first thing to think about is: 

• The reason you’re taking out life insurance 

• What cover you need

• How long you need it for

Not sure how life insurance works? Find out here.

Do I need life insurance?

Not everyone needs life insurance, so think about the reasons it could be useful to you and your family before buying. 

Some policies start from as little as £5 a month - this makes life insurance popular as a safety net for a lot of people. However, whether it is truly worth the money depends on your personal circumstances.

For example, if you have just taken out a mortgage, a life insurance payout could clear your debt in the case of your death. But if you have cleared your mortgage and do not have any dependents, it may not be worth buying a policy.

One of the main reasons people buy life insurance is to take the financial stress away from dependents you leave behind.

If you have kids, a life insurance policy could pay for childcare costs or it may ensure your dependents have a sum of money to help them with their finances. It could also go towards education, including university fees.

If you are older, life insurance premiums are likely to be more expensive. Costs can also increase if you have any health problems or smoke.

When is the right time to buy life insurance?

The earlier in life you apply, the cheaper your premiums will be, as insurers will consider younger customers less likely to claim.

You can apply for most life insurance policies from 18 years old, but this does not mean you should take out a policy and start paying premiums before you need to.

Only take out life insurance if you think you might need it. For example, you might want to ensure your mortgage or other debts are paid off when you die, rather than passing them on to your loved ones.

Most people think about taking out a policy when they have a significant life change such as getting married, taking out a mortgage, or having children.

Can you get a joint policy?

Yes, most life insurance companies let you apply for cover under two names.

A joint life insurance policy can be cheaper than buying two individual policies. However, the cost difference can be small and these policies only pay out once, after the first person dies.

Read your policy documents carefully to understand exactly how your cover works.

How much cover do you need? 

If you are unsure how much cover you need, consider the following:

• If you have a mortgage or any other borrowing. Choose an amount of cover that will at least payout enough to cover your debts when you die.

• If you have children or anyone you care for, a payout could help support them financially. Make sure you are covered for what you want to pay for, such as university fees, a house deposit, or to pay for care.

A cheaper option is to choose a decreasing insurance policy, rather than a policy paying out a set amount at any point. This is usually designed to cover a mortgage, which will also go down as you make repayments. 

Can you choose an income payout instead?

You don’t have to have a lump sum and if you would rather have an income payout, you could look for a family income benefit policy. They pay out an income until the end of the policy's term.

Learn more about family income benefit here.

Your insurer will pay an income amount of your choosing to your loved ones for the remainder of the policy's term if you die before it ends. These policies are not available from every insurer and you may need to use an independent financial adviser or broker to find cover that offers an income payout.

How long do you need a policy for?

When you know how much cover you need, you should think about how long you want that cover to last.

• If you have a mortgage, you could match the repayment term so if you die before paying off your mortgage, the life insurance payout will cover the rest.

• If you have children, you may want the cover to last until they reach a certain age, such as 25 or whenever you think they may move out and look for their own home.

Finding the best price

When you know what you need from a policy, you should get as many life insurance quotes as possible to find the cheapest monthly premiums.

When comparing life insurance policies, do not just pick the cheapest one. You want to find the policy that gives you all the cover you need, just for the cheapest price.

Choosing cheaper cover that doesn't suit your needs is counterproductive, as it may not pay out when you or your loved ones need the money most.

Use our comparison to find life insurance policies