How to compare life insurance costs

When setting up a life insurance policy, there are a wide range of companies that you can choose to use. The quality of the plans you are comparing is crucial (and it’s important to make sure that any life insurance plans you are considering offer quality cover), however cost is also a key consideration. We’ll look below at a couple of tips for comparing life insurance costs.



Make sure you are comparing similar premiums structures

Life insurance plans usually offer two premium structures to choose from. The first premium type is usually called a "stepped" (or "rate for age" premium). This type of premium will increase every year with age. The rate of increase is small for younger people but as a person gets older it increases rapidly – and in the long term becomes extremely costly.



On the other hand a "level" premium will not increase with age. As the name suggests it remains the same every year. This type of life insurance premium will start out more expensive than a stepped premium, but in the long term will be much more cost effective.



So, if you are comparing life insurance premiums, make sure any you are comparing are of a similar structure (and also think about which structure is going to be better for your situation).



Ask for a long term premium projection

This will help you with the "stepped" versus "level" choice mentioned above, however it is also important for another reason. Some life insurance companies will have a built in discount on their first year’s life insurance premium. This makes the premium look more affordable – but means that in the second year it might be more expensive than other insurers. So make sure you ask for a projection of likely costs – this will help you understand actual costs over the long term.



Check if the premiums are guaranteed

Some insurers offer guaranteed life insurance premiums, while others reserve the right to change their premiums in the future. Make sure you know which type any life insurance plan you’re considering offers.  



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