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Why life insurance costs less than you think

Why life insurance costs less than you think

Sep 14, 2023

If you were to pass away, could your loved ones continue to pay their bills? Would your children have the life you wanted for them? And could your family continue to survive without your income?

If not, it’s time to think about putting some protection in place.

One of the most common reasons that people decide not to take out vital life insurance protection is that “it is too expensive”.

In an environment where the price of essentials such as food, energy, and mortgage/rent payments have risen sharply, finding spare cash for protection might seem like a step too far.

However, putting life insurance in place could cost significantly less than you think. Indeed, a recent survey in the US found that 82% of people overestimate the cost of cover.

So, if you want to buy protection, but you think it’s too expensive, read on to find out why you might be wrong.

82% of consumers think life insurance costs more than it actually does

A majority of Americans over the age of 25 (82%) think a typical term life insurance policy costs more than it actually does. That’s the conclusion of a new survey by Forbes which reveals that the cost of cover is one of the main misconceptions Americans have about life insurance.

Forbes asked consumers to estimate the cost of a 10-year term insurance policy, covering $500,000 (around £400,000) for a healthy 40-year-old.

Remarkably, just 3% of respondents correctly guessed it costs about $20 (around £16) each month.

More than a quarter of respondents (28%) guessed the monthly cost for this policy would be $60 (around £48) while 1 in 16 people estimated that life insurance costs six times more than it actually does.

“How much do you think a new 10-year, $500,000 term life insurance policy would cost for a healthy 40-year-old buyer?”

Source: Forbes

What this research shows is that consumers significantly overestimate the cost of protection. Indeed, life insurance in both the US and UK costs less than most people expect, with policies in this country starting from around just £5 to £6 a month.

Protecting your loved ones can cost less than a Netflix subscription or a couple of takeaway coffees each month – not the £40/£50 or more that many people believe.

Consumers are also unsure what affects the cost of life insurance

The Forbes research also uncovered a lot of confusion about how life insurance is priced, and the factors that affect the cost of cover. It found that:

  • 42% of respondents believe their household income affects life insurance quotes.
  • 2 in 5 people mistakenly think the number of children they have affects the cost of cover.
  • Most respondents (78%) did not know that using nicotine or marijuana can affect life insurance quotes.
  • 70% did not know that prescription drug history can influence the cost of protection.

Household income, how many children you have, and how many life insurance policies you already have are not considered in life insurance cost calculations.

However, life insurance quotes are affected by many factors. Here are the most common.

The amount of protection you want

The first factor that influences the cost of protection is the level of cover you want. Simply put, the higher the cover (the “sum assured”), the more you’re likely to pay.

When deciding on the amount of cover you need, you should take a range of factors into account:

  • Do you have a mortgage that you would like your loved ones to be able to repay if you die? If so, you’ll want to ensure that at least the outstanding balance is covered – this will enable your family to repay the loan and own their home outright.
  • Do you have any other debts? You might want to ensure that credit card debts or personal loans could be repaid if you passed away.
  • Could your loved ones continue to pay their essential bills without your income? If not, you may want to ensure that a lump sum is available to replace your income if you’re no longer around.
  • Do you want to ensure a lump sum is available to cover your funeral expenses? According to Sun Life, the “cost of dying” – the total cost of a funeral including professional fees, the funeral service, and optional extras like the party or wake – is now £9,200.

If you’re not sure exactly how much cover you need, our handy life insurance calculator can help you to work out how much protection to buy.

Age and term

The cost of life insurance is partly based on risk. An insurer will consider the statistical likelihood that someone your age will die within the term of the policy.

So, it stands to reason that the older you are, the more expensive life insurance will generally be.

Bear in mind that the term of the policy will also influence the cost. If you’re a 40-year-old, a policy covering you for 10 years is likely to cost less than a policy covering you for 20 years, for example.

Health and medical history

As the cost of protection is based on an assessment of risk, underwriters will also consider your health and medical history to determine your premium.

If you have experienced medical issues in the past, or you take certain medication, you may find that cover is more expensive. For example, you recently read about how life insurance might be more expensive if you have a higher BMI.

Smoking and vaping

If you smoke or vape, you are more likely to suffer from certain conditions such as heart problems, cancer, or respiratory diseases.

Consequently, your cover is likely to be more expensive. You recently read about how vapers will pay more for life insurance than people who do not smoke.

Occupation and hobbies

If you have a high-risk occupation or you enjoy risky hobbies then you may find you pay more for your life cover.

This may be if you work at heights or in a dangerous environment, or if you enjoy activities such as parachuting or skiing.

We can help you to find low-cost cover

As you have read, life insurance is likely to cost you less than you think.

Another way to ensure you don’t pay more than you have to for your protection is to use a specialist broker. At I’m Insured, we work with many of the UK’s top insurers – the likes of Aviva, Legal & General, Royal London, and Scottish Widows – to compare the costs of cover.

In just a few minutes you can get life insurance quotes from a wide choice of providers and compare the cost of cover. This can help you to ensure you find the cheapest and most appropriate protection for you, and that you don’t pay more than you should.

Our experts can also help you to arrange your cover – especially if you have previous or existing medical conditions, or you want life insurance and you live in the Isle of Man, Channel Islands, or Gibraltar.

We can also help you through the underwriting process, and even assist with putting your property in trust if you want to.

So, if you’re worried about the cost of life insurance, get a quote today to find out just how affordable it can be. Get a life insurance quote online now and give you and your family peace of mind.




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