What is the Average Cost of Life Insurance in the UK?

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By Crispin Bateman
Updated on Thursday 19 May 2022

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How is life insurance calculated?

Life insurance is a gamble. It’s the life insurance company betting on you living longer than the length of your policy. If you do, then you both win – them because they made some money off you that they never have to give back, you because, well… you’re alive!

This means that everyone’s life insurance policy is calculated based on a huge number of factors. If you’ve ever tried to work out how long are going to live, you’ll have learned that there’s simply too much to think about to get a clear answer. Life insurance companies do their best to calculate your lifespan, but of course, despite the finest formulas in the world, they’re still just guessing. An educated guess, for sure, but still a guess.

You present a level of risk for them. If you die during your insurance term, you cost them hundreds of thousands of pounds. It’s a risk they are willing to take, as you are working hard to help them win, but it’s risk, nonetheless.

How is life insurance calculated? It’s a sum worked out by how much risk you present.

Risk #1 – The sum assured (or the amount the policy pays out)

If you insure yourself for £1,000,000 then you are more risk than someone who only wants to insure themselves for £300,000. It’s a simple, self-explanatory fact that significantly influences the cost of your monthly premiums.

But what is the average life insurance payout in the UK? It’s between £200,000 and £300,000. Life insurance advisors will suggest getting a sum assured that’s ten times your salary and this is reflected in the average payout, with the average UK salary currently standing at £27,600.

Risk #2 – Your age

Assuming no accidents or unforeseen circumstances, most people now live well into their 70s and 80s. Trying to take out a life insurance policy for a 20-year term aged 50 is going to be substantially more expensive than the same policy when you’re only 35. Simply put, the younger you are the smaller your life insurance cost.

This is so significant, that specialist policies exist for life insurance over 50.

Risk #3 – Your health

You don’t need to go to the gym three times a week but being of a general level of good health makes a world of difference to the risk you present to your prospective insurer. The average life insurance cost in the UK is on the rise partly because so are the levels of obesity, diabetes and other health issues across the country.

Staying healthy makes life insurance cheaper – so much so that for some the savings can be used to pay for a gym membership! Some companies, such as Vitality Life, even offer cut-price premiums if you are willing to regularly submit your health data for them – they also do deals on fitness tracking watches and more!

As you get older, your health naturally deteriorates and it is sadly true that if you have a pre-existing medical condition, it’s going to weigh on your life insurance premiums. After all, it’s a greater risk for the insurance company.

Risk #4 – Smoking

What’s the average life insurance cost per month for a smoker? As much as twice that for a non-smoker! Life insurance companies hate smoking so much that it gets its own category here.

You are classed as a smoker if you have taken a single puff in the last twelve months, so if you plan to give up to shave costs off your life insurance, then you have to really give up – there’s no occasional social cigarette allowed! Even vaping, despite being hailed as a safer and healthier alternative, and smoking CBD (again, despite the relevant marketing drive) count as smoking as far as the insurance company are concerned.

Give it up – you know you want to!

Risk #5 – Being risky!

Funnily enough, being risky is seen as a risk. It’s true that if you engage in an activity as a regular part of your lifestyle which is an understood risk, you have to declare it to your insurance company in your application and it’s almost certain to push up that premium.

Many insurance companies will go down a different route, however – exclusion. An exclusion is a clause in your life insurance that says, ‘we don’t have to payout if you die doing this…’ and ‘this’, of course, is whatever risky activity you like to undertake.

Deep sea diving? Excluded. Base jumping? Excluded. Snake charming? Excluded (probably, we haven’t actually checked this one).

If your policy has an exclusion like this then your premium should be safe – after all, they don’t penalise you twice, but it does mean you need to be extra careful when being extra risky!

Risk #6 – The type of life insurance

Technically, the type of life insurance isn’t a risk in of itself, but it represents a risk when paying out. There are four main types of life insurance and each presents a different risk to the insurer.

In ascending order of risk:

Decreasing Term insurance – This specialist life insurance for mortgages has a sum assured that lowers over time to match the decreasing balance on your repayment mortgage. It runs out once your mortgage is paid off and becomes substantially less risk in terms of payout as time goes on. It’s a very low-risk proposition for the insurance company and this is reflected in its premiums, making it the cheapest life insurance around.

Level Term Insurance – Level term insurance has a defined end point (lowering risk) but a generally high payout value (increasing risk). When discussing insurance throughout this article, level term insurance has been the type used in examples because it’s the main (and most relevant) choice for life cover in the UK.

Whole of life insurance – WoL runs to the end of your days and will always pay out when you die making it a very high-risk for the insurer. So high, in fact, that the payout is guaranteed! This is mitigated by high premiums which are paid constantly, with the insurer hoping you live long enough that you’ll have paid in more than the policy pays out before you pass away. Whole of life insurance tends to have lower sums assured so that the premiums are not out of hand and is best used for covering funeral costs and other smaller financial issues.

Over 50s insurance – This subset of whole of life insurance is a guaranteed acceptance type of insurance with absolutely no medical questions. It has the high risk of whole of life, added to by the lack of data regarding any pre-existing medical conditions. For people suffering from long-term illnesses, over 50s insurance provides them with a way to secure a lump sum for their loved ones after death, but the premiums are among the most expensive.

Risk #7 – Everything else

A few remaining details may factor into your overall premium estimate when looking at life insurance quotes. Your occupation, your location and your family history are three factors which rarely make much of an impact, but some insurers will want to know about. After all, if you work on an oil rig, come home to a violent area and had multiple ancestors with fatal genetic diseases then you may be considered slightly higher risk!

Finding the best life insurance companies in the UK

Getting that elusive best life insurance policy across the UK requires specialist help. Some life insurance providers are willing to deal directly to the public, but their rates are never as competitive as can be reached through a professional life insurance broker.

It’s important not to be taken in by some outrageous claims, too. Yes, it is possible to get life insurance for £6 per month – if you are a 22-year-old non-smoker with a healthy addiction to the gym. For the rest of us, there’s realistic (but still very affordable) pricing. When wanting to know how much life insurance costs for a 35-year old with an occasional smoking habit, a headline-grabbing quote taking none of that into account is less than useful.

Instead of asking ‘how much is life insurance?’, ask ‘how much is life insurance for me?’. Get some real quotes and call the broker for life insurance advice. Is level term life insurance the right thing for you? Do you want to put the policy into trust? Have you considered index-linking? Joint policies? Critical illness cover?

For all these answers you are going to have to speak to someone.

Our Chosen Broker - Life insurance with Quick Quote Life

At Compare UK Quotes we look at the options so that you can go straight to a place you trust. Quick Quote Life aren’t a simple online broker staffed by computers, like Cavendish Online or Moneyworld, but have a full registered advice service with professional specialists able to discuss your personal circumstances to find the life insurance policy to suit you.

While the quotes you receive might not be the very lowest available, the addition of a trusted financial specialist to help you through the various options is worth far more. You could save thousands over the many years of your policy through an online broker, but equally you could find yourself trying to claim on a policy that doesn’t actual cover you in the way you thought.

The final risk – lying on your policy application

Before we go, a word to the wise. Don’t lie. It may be tempting to say you haven’t smoked for years because you only have one or two a month while out with your friends, or to drop a stone or two from your real weight because you plan to get back to that level anyway, but lying on your application is the worst thing you could do.

If the insurance company get the slightest sniff that you falsified information during your application, they will investigate and they will find out the truth. When they do, your family will be left without the money you planned for them, and a potential court battle as they try to prove your innocence. If you are discovered while still alive, then you could face fraud charges and even a prison sentence.

No matter how much money you save, it isn’t worth doing. Far better to take out a lower level policy that you can afford than push for one you can’t by cheating on the details.

Life insurance advice with Compare UK Quotes

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