Is cheap life insurance worth the risk?
Overall, the cost of life insurance has dropped over recent years, mainly because the average person now lives a longer life, so is less likely to pass away during the term of their life insurance. This reduces the risk and saves money for insurance providers. At the same time, insurers are having to cut their premiums to attract customers as the insurance marketplace becomes more crowded and comparison websites such as ours make it easier to compare quotes and find the best deal.
Do cheaper policies offer a lower level of cover?
Once you start shopping around for life insurance, you will soon see that policies can vary quite a bit in terms of price. But is there a big difference in the level of cover offered by cheaper policies in comparison with more expensive policies? The only way to establish the exact differences is by comparing the small print. In particular, look out for the following:
- Exclusions: A cheaper policy may contain lots of exclusions, for example, refusing to pay out if you die as a result of alcohol abuse or while taking part in an extreme sport.
- Flexibility: Cheaper policies may be less flexible than more expensive cover – for example by removing the option to skip a payment (or a few payments) if you find you are temporarily struggling financially.
- The likelihood of your policy costs rising dramatically in future years: Check whether your insurer offers guaranteed premiums – that is, a fixed amount for a set period of time – and how long that period lasts. Cheaper policies may offer a shorter guaranteed period than a more expensive policy. Remember that after the guarantee period you will need to provide your insurer with an update on your recent health, and they may adjust your premiums accordingly – or even refuse to offer you any cover – if you have suffered ill-health. If this is the case, you could end up paying a lot for life insurance cover, or even struggling to find a new insurer, because of your recent medical history and your increasing age.