The nine best ways to lower life assurance premiums - Limerick financial planner

IT was many years ago when I first wrote about ways you could lower life assurance premiums and I did so because I was encountering people who were paying more than they needed to. And I wanted to re-visit this area again because I continue to meet people who are paying more than they need to.
And I also continue to meet people who have cover in place and they don’t need it and I’ve met people who don’t have cover and really do need it, but for the purpose of this article I want to focus on ways you could reduce the cost of life assurance premiums, and I think there are nine of them.
And I’ve said it before and I’ll say it again, we would do anything to protect our family and we would pay whatever it takes to have the right level of insurance cover in place for them to make sure they are adequately protected in the event of our death or should we suffer a serious illness.

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But we don't want to pay any more than we need to either and as I said already my experience is that a lot of people are paying more than they need to for products some don’t actually need or understand.
And the income we earn is hard earned and we want to make the best use of it especially in the times we live in and it angers me to see so many people paying what could be thousands of Euros’, more than they need to over their lifetime which is why I’m going to share with you some strategies which will help reduce the amount you need to spend on life cover each month.
When people first enquire about how much a policy will cost them they are given a number but that doesn't mean they are guaranteed that this will be the amount they’ll end up paying. Because when an application is submitted, it will go through an underwriting process and the underwriter will consider things like your height/weight ratio, your smoking status, your occupation, your previous medical history as well as your families and they will even look at what your hobbies and pastimes are.
Which means your health plays a huge role in what premiums will end up being. Your health and lifestyle is an indicator as to how risky you are to insure which is why life companies ask so many questions about it at application stage.
They will consider a number of different areas and each can influence the cost you end up paying and the first three areas I’m going to outline are ones you may have some control over and if you want to decrease your cost you need to consider:

Losing weight
If a provider believes you are over-weight based on your age and height, they may think your chances of developing for example diabetes or heart disease or high blood pressure are increased and as a result they will charge you more.

Drinking less
Drinking in excess than what is considered normal will also increase the amount you pay or at times you may not even be offered cover, so consider cutting back on the amount you consume each week.
I have seen people pay between 50% and 100% more in premiums because of their alcohol consumption.
And according to the HSE drinking in excess of 17 units per week would not be advisable because your chances of developing alcohol-related health issues, such as liver disease or high blood pressure and some cancers become elevated. And that’s probably a number life assurance underwriters are looking at as well.

Stop smoking/vaping
Smoking will increase the amount you pay because it increases your mortality risk and an insurance company will therefore charge you more to insure you.
For example, I did a quote for a new client of mine recently who was 40 and needed mortgage protection cover of €250,000 over a 25 year period. He was a smoker so the best monthly premium available in the market was €40.67.
If he was a non-smoker the premium would have been €21.01.
Because he was a smoker he was paying a premium which was 94% higher than someone who was a non-smoker.
Total premiums for the non-smoker would be €6,303 and for the smoker, €12,201.
Add in the cost of smoking and the difference is enormous.

Lower the term
The longer the policy is in place the more you will pay.
Choosing a term of 20 years over 30 means a life company has to cover your life for 10 more years meaning you will pay more.
If you lower the term by 10 years on a policy of say €400,000 for a 40-year old female, she will pay 26% less in monthly premiums.

Lower the level of cover
The level of cover is a big factor in determining your monthly premium and if you feel your overall premium is too high you could reduce the cost by lowering the sum assured.
Before you anything, the level of cover I believe you should have in place is linked to your monthly income.
If you passed away, what income needs to be replaced?
But you need to consider what income would be paid in the event of your death eg an employers’ pension, widow/widowers state pension, rental income etc. and what income would no longer be required if you passed away eg mortgage repayment is gone, the amount you spend on yourself, insurance premiums etc.
And what about the existing level of savings, existing and past pension funds that would be payable to your estate and/or a death in service benefit paid by your employer?
All of these factors need to be considered and reviewed to determine whether you are over or under insured.

Have the correct policy in place
You really only need life assurance for a certain period of time and once dependents aren’t financially impacted by your passing and/or if you have children who are now financially independent and off the pay roll and you have paid down debt and saved for your retirement then there really isn’t any need for much life cover other than something that will cover funeral expenses.
So, choose a term assurance policy which has an end date because it is much cheaper than the alternative which is a whole of life policy which as the name suggests lasts for as long as the life insured is alive.
The watch out for this type of policy is that the premiums can start off low but as you get older the premium is reviewed typically every five years and can increase significantly to the point where it becomes offensively high resulting in people either cancelling the policy or reducing their level of cover.

Use an independent adviser
Some people end up wasting their money because they don't have an independent financial adviser working on their behalf who is trying to find them the right level of cover with the right provider who has the best premium available in the marketplace.
When you work with a tied agent they will only give you quotes from the one company they can only work with. They can't show you what other companies charge because they are only working with one provider.
So, you can counteract this in two ways.
First you can choose to work with a financial adviser who is authorised to work with multiple providers and can therefore compare lots of different quotes which means you will end up choosing the provider who has the best premium. And good to know that you are getting the best premium available.
Or secondly, you could choose to work with a tied agent but before you put pen to paper, you need to see if the premium is competitive or not and that is finding out what other companies are offering.

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If, for example a bank could only offer you a premium from one life assurance provider and lets sat its’ €40 per month but you’ve seen another provider offer a premium of €30 for exactly the same cover, then give the bank this information and tell them that you are happy to move forward with them but they have to drop their monthly cost from €40 to €30.
And they may offer you what’s called a price pledge which means they’ll match the best premium available so if you can show them that you can get cover at a lower price elsewhere, they’ll match the premium to get your business.

Get a policy when you are younger
The younger you are when you take out life cover the less you will pay in monthly premiums.
You may not think you need cover but it could be a good investment because a 30-year old who takes out a policy for 25 years for say €350,000 will pay 43% less in monthly premiums than a 40-year old will over the same time period.

Do you need any cover
And maybe you’ll get a 100% reduction in premiums by not having a life policy at all.
The only reason you would take out a standalone life policy is if someone was financially impacted by your death. If no one is and you have no dependents, then there’s a strong argument that you don’t need any cover at all.
The only reason I could think of you having cover is because (a) you have debt that isn’t covered by a life policy eg a term or car loan and rather than your family inheriting this debt you want to have it paid off from the proceeds of a life policy or (b) you want to have a policy in place that would cover off the possible future loss of a death in service benefit.

Liam Croke is MD of Harmonics Financial Ltd, based in Plassey. He can be contacted at liam@harmonics.ie or www.harmonics.ie