The way to get policies even cheaper than going direct is to use the niche ‘execution only’ brokers give you the commission, and instead you just pay a small fee, and as such you get identical policies but at a much, much lower price.
However beware that the fact they’re ‘execution only’ means they just find you the price without giving any advice. If you'd like advice, to ensure you have the right cover or come back if it's not, read the Getting Advice section.
Having surveyed over 20 insurers for a range of quotes, there are three which are always competing to be cheapest; best practice is to use all three.
Remember all quotes are based on a healthy person so your price may go up if you have any health issues. Always check the full terms of the policy meet your needs before you buy.
Cavendish Online
This has been my top pick for over four years, and has consistently offered good prices during this time. It pioneered giving up all its commission in return for a one-off fee; £35 for an online application or £45 over the phone and can make it over 50% cheaper than most full-commission brokers.
It offers two quotes, the ‘fee' and ‘fee-free' option; always choose to pay the fee, the monthly saving eats up the cost of the fee in just a few months. The commission option is only worth considering if your premiums (monthly payments) are under £7 a month. It has also recently introduced an 'instant cover' option, whereby applicants can get immediate cover if their application is medically fairly clean. Link: Cavendish Online
MoneyWorld
This is a firm of independent financial advisers that provides life insurance for a flat fee of £25 and no commission, either online or on the phone. It’s been around a while but recently moved to the ‘one-off fee’ practice and lowered its prices, and is often the cheapest of the top three
Quit smoking or planning to?
Non-smokers pay a lot less cash than smokers, simply because they're a lot less likely to die during the term. To count as a 'non-smoker' you need to have been genuinely smoke free for at least a year. Therefore one year after the date you quit, you should go throught this process to get a new deal and you should save enormously. Don't be tempted to lie though... if you were to die and it was discovered you had been a smoker it could invalidate the policy. See other saving in the Stop Smoking MoneySaving guide.
While some may be worried that ‘cheaper isn't better' actually, with term assurance, there's no investment element as the payout is fixed; and there's no argument over whether someone is dead so this is a truly simple policy. In fact, in most cases, (and do forgive the virtual shouting for necessary emphasis
While some may be worried that ‘cheaper isn't better' actually, with term assurance, there's no investment element as the payout is fixed; and there's no argument over whether someone is dead so this is a truly simple policy. In fact, in most cases, (and do forgive the virtual shouting for necessary emphasis
Is Mortgage Life Assurance worth having?
Most lenders strongly recommend you get a policy when you take out a mortgage and it isn’t a bad idea. If done correctly, it shouldn't be prohibitively expensive. Yet lenders will try and flog you their own ridiculously expensive policies, often without regard to circumstance. For example, if you don’t have anyone to leave your property to and money is tight, then there’s no need.
For many with dependents it’s also worth considering the cheapest Level Term Assurance policy instead. At the very least when getting a new quote, see what the price difference is. This is because level term policies pay a fixed amount rather than decreasing sum. This has two advantages; first it means if you trade up to a bigger house in future you mightn’t need much additional insurance, plus as well as paying off the house it leaves extra money for dependents.
An unpleasant fact... why's it assurance not insurance?
If you're wondering why it's life ‘assurance' not ‘insurance', that's because assurance is for something that is certain to happen, insurance is where there is only a risk of it happening..... and death is assured. Though some do call this ‘insurance' too as there's no guarantee you'll die within the term
For many with dependents it’s also worth considering the cheapest Level Term Assurance policy instead. At the very least when getting a new quote, see what the price difference is. This is because level term policies pay a fixed amount rather than decreasing sum. This has two advantages; first it means if you trade up to a bigger house in future you mightn’t need much additional insurance, plus as well as paying off the house it leaves extra money for dependents.
An unpleasant fact... why's it assurance not insurance?
If you're wondering why it's life ‘assurance' not ‘insurance', that's because assurance is for something that is certain to happen, insurance is where there is only a risk of it happening..... and death is assured. Though some do call this ‘insurance' too as there's no guarantee you'll die within the term
Mortgage Life Insurance
Your house is a place that you and your family call home. A place that protects your loved ones and provides a shelter from the outside world. Your house is a big investment – probably one of the biggest you’re ever likely to make. It is also probably the single largest source of personal debt. That’s why protecting your family and home is so important.
The sudden loss of income can put an enormous strain on a family’s ability to pay their mortgage. Mortgage life insurance is an excellent way to help protect your family in the event of an untimely death.
Features of Mortgage Life Insurance
A Mortgage Term Life insurance policy will provide your loved ones with a guaranteed death benefit if something happens to you. They can use these funds to help make their mortgage payments or pay the loan off.
You choose the coverage you need based on your mortgage balance.
Coverage is available for 15 and 30 years.
The amount of insurance is level for the first five years and then decreases annually at the beginning of each policy year, with a minimum amount of 20% of the original face amount.
You can pay premiums annually, semi-annually, quarterly, or monthly
If you need lifelong coverage, you can simply convert to permanent coverage and premiums – no matter your state of health.
If you have auto insurance with State Farm, purchasing a State Farm life insurance policy may entitle you to a discount on your auto premiums with our multi-line discount.
The sooner you start, the lower your premiums could be
The sudden loss of income can put an enormous strain on a family’s ability to pay their mortgage. Mortgage life insurance is an excellent way to help protect your family in the event of an untimely death.
Features of Mortgage Life Insurance
A Mortgage Term Life insurance policy will provide your loved ones with a guaranteed death benefit if something happens to you. They can use these funds to help make their mortgage payments or pay the loan off.
You choose the coverage you need based on your mortgage balance.
Coverage is available for 15 and 30 years.
The amount of insurance is level for the first five years and then decreases annually at the beginning of each policy year, with a minimum amount of 20% of the original face amount.
You can pay premiums annually, semi-annually, quarterly, or monthly
If you need lifelong coverage, you can simply convert to permanent coverage and premiums – no matter your state of health.
If you have auto insurance with State Farm, purchasing a State Farm life insurance policy may entitle you to a discount on your auto premiums with our multi-line discount.
The sooner you start, the lower your premiums could be
Why You Don’t Need Mortgage Life Insurance
When you signed for your mortgage, you were offered mortgage life insurance for mere pennies a day. If you chose to decline it, you had to sign all sorts of liability forms declining said insurance, which no doubt made you second-guess your decision, and possibly change it.
There are several reasons why declining the bank-offered insurance is advisable in favor of an individual life insurance policy:
Mortgage Life Insurance Insures the Bank, not You
Okay, so your life is in the lurch, but your family doesn’t actually see any of the life insurance proceeds should you die. The bank is the beneficiary of the policy. So the good news is that your estate is absolved of its mortgage liability when you die. But the bank is truly the winner here – they get their money. And for this, you get to pay the monthly premiums.
Individual Policy: If you had higher interest credit card debt for example, your family could choose to pay that off instead and carry the mortgage. Choices abound with an individual policy.
Mortgage Life Insurance is a Decreasing Benefit with Level Premiums
Mortgage life insurance pays off the balance of your mortgage. And if you are paying it off responsibly, that amount will decrease as the years go by. However your premiums remain the same. Some would argue that this is accounted for in calculating the premiums, however I have sifted through many quotes and illustrations, and not found this to be the case.
Individual Policy: Standard term life insurance will offer a level benefit for the term. You pay “x” dollars a month, and if you die your beneficiaries will receive “x” dollars. Period.
Changing Mortgage Lenders Means New Underwriting
At the end of your five year term (for example), you decide to switch your mortgage to another bank offering better rates. However if you want the life insurance option, you will have to succumb to the medical questionnaire and underwriting process again. If something has happened to affect your insurability during this time, you could well be declined.
Individual Policy: Most term life insurance has a renewability clause. Under the terms, you have the option of renewing the insurance at the end of the specified term (eg: 10 years), but at significantly higher rates. The premise of this is that you are guaranteed to be insurable (until age 65 or 75 for example), but will pay increasing rates at each renewal. If instead you reapplied at the end of the term for a new policy and are healthy, you would get much lower rates. But if something had indeed happened to you to affect your insurability, with the renewable clause at least you still have some coverage.
You may say “oh, but xyz well-known insurance company is offering the insurance through the bank – it’s not just bank insurance, it’s an individual policy. I get paperwork and everything”.
Although ‘xyz insurance’ is underwriting the policy, and although you know they offer individual policies , if you sign for it through the bank it is still mortgage life insurance. The issue here is not the insurance company; it’s the product. Don’t be fooled into thinking that your mortgage life insurance policy is a suitable substitute for your own individual life insurance policy. Do a proper needs analysis (preferably with your financial planner), and cover off the exact amount of life insurance you truly require.
There are several reasons why declining the bank-offered insurance is advisable in favor of an individual life insurance policy:
Mortgage Life Insurance Insures the Bank, not You
Okay, so your life is in the lurch, but your family doesn’t actually see any of the life insurance proceeds should you die. The bank is the beneficiary of the policy. So the good news is that your estate is absolved of its mortgage liability when you die. But the bank is truly the winner here – they get their money. And for this, you get to pay the monthly premiums.
Individual Policy: If you had higher interest credit card debt for example, your family could choose to pay that off instead and carry the mortgage. Choices abound with an individual policy.
Mortgage Life Insurance is a Decreasing Benefit with Level Premiums
Mortgage life insurance pays off the balance of your mortgage. And if you are paying it off responsibly, that amount will decrease as the years go by. However your premiums remain the same. Some would argue that this is accounted for in calculating the premiums, however I have sifted through many quotes and illustrations, and not found this to be the case.
Individual Policy: Standard term life insurance will offer a level benefit for the term. You pay “x” dollars a month, and if you die your beneficiaries will receive “x” dollars. Period.
Changing Mortgage Lenders Means New Underwriting
At the end of your five year term (for example), you decide to switch your mortgage to another bank offering better rates. However if you want the life insurance option, you will have to succumb to the medical questionnaire and underwriting process again. If something has happened to affect your insurability during this time, you could well be declined.
Individual Policy: Most term life insurance has a renewability clause. Under the terms, you have the option of renewing the insurance at the end of the specified term (eg: 10 years), but at significantly higher rates. The premise of this is that you are guaranteed to be insurable (until age 65 or 75 for example), but will pay increasing rates at each renewal. If instead you reapplied at the end of the term for a new policy and are healthy, you would get much lower rates. But if something had indeed happened to you to affect your insurability, with the renewable clause at least you still have some coverage.
You may say “oh, but xyz well-known insurance company is offering the insurance through the bank – it’s not just bank insurance, it’s an individual policy. I get paperwork and everything”.
Although ‘xyz insurance’ is underwriting the policy, and although you know they offer individual policies , if you sign for it through the bank it is still mortgage life insurance. The issue here is not the insurance company; it’s the product. Don’t be fooled into thinking that your mortgage life insurance policy is a suitable substitute for your own individual life insurance policy. Do a proper needs analysis (preferably with your financial planner), and cover off the exact amount of life insurance you truly require.
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