MONEY COMMENT
Find Cheaper Financial Protection - Today!

By Cliff D'Arcy
October 21, 2004

With rising consumer debt, climbing interest rates and wobbly house prices, it's important to look around for ways to boost your finances. Cutting your insurance premiums – or getting more protection for the same money – is a great way to save money.

Indeed, according to leading specialist insurance broker LifeSearch, most of us are still paying well over the odds for our protection. LifeSearch's latest report into protection products shows that life insurance is considerably cheaper today than it was five years ago. A typical policy written in 1999 with a monthly premium of £30 would cost around £22 a month today. In other words, its cost has fallen by over a quarter (27%).

So, if you have any life insurance policies, it should be worth your while shopping around for cheaper premiums (known as 're-broking your business'). Even more so if you bought your policy on the high street, where premiums can be three times as high as those charged by the Best Buys!

LifeSearch also recommends that customers consider products that replace your income, rather than paying out one-off lump sums.

For example, instead of life insurance, why not buy Family Income Benefit (FIB), which pays your dependants a regular income if you die? As I showed in this article, monthly premiums for FIB can be half those for an equivalent level of lump-sum life insurance. What's more, with FIB, your family doesn't have the worry of investing a lump sum to replace your income.

LifeSearch is also very keen on income protection (IP), which is long-term sickness cover). This pays out a tax-free income if ill health prevents you from working. Unemployment cover can also be included. By choosing a longer initial 'deferral period', you can dramatically bring down the cost of IP.

For example, if your employer pays you sick pay for six months, you could choose a deferral period of six months. For a 35-year-old non-smoking male, cover for a salary of £30,000 over 25 years would cost £26 a month with a six-month deferral. The same policy with a three-month deferral would cost £38 a month, which comes to £3,600 more over 25 years.

I could go on and on about how many times I've seen families suffer because a breadwinner wasn't properly protected. Instead, I'll leave you with six tips from LifeSearch:

1. Shop around. Don't trust your bank, mortgage lender or a tied agent (a financial salesman working on behalf of one company) to give you good advice or low premiums. Check several different outlets for competitive quotes.
2. Get the right cover. Do you need a lump sum or monthly income, critical illness, sickness waiver, guaranteed or reviewable premiums? If you don't understand all the options, contact an independent specialist broker.
3. Sweet sixteen. If you want to replace your income, you'll need a lump sum of around sixteen times your salary at today's interest rates. So, if you're on £20,000, a lump sum of £320,000 should do it (unless you go for FIB, of course).
4. Always buy separate individual policies. Buying two policies means two payouts, not one, plus you don't leave a surviving partner uninsured and it only costs a few quid more. Learn more here.
5. Use a trust. This is a simple, free way to protect any lump-sum payout from the taxman and speed up payment. Learn more about Inheritance Tax and trusts here.
6. Tell the truth. If you smoke sixty ciggies a day and are ten stone overweight, don't tell your life insurer that you're a fit non-smoker. If you've lied, your family will lose both the premiums you've paid and any payout.

More: Get a lower quote from our Insurance centre.

Many thanks to Kevin Carr at LifeSearch for providing this data.