How do you reduce your insurance premiums? | Insurance tips

Podcast: Let’s Talk Money and Mortgages

Host: Gemma

Guest: Suneth – Founding Director, WIS Group of Companies, Trained Accountant and IFA

Topic: How to reduce monthly insurance expenses without cancelling essential coverage

Q1: Should I consider cutting my insurance to reduce expenses?

Answer:

Cutting insurance is not recommended even during financial difficulties.

Insurance protects against unexpected medical bills or the inability to work, which could affect your ability to meet mortgage repayments.

Instead of cancelling, consider ways to reduce premiums while keeping coverage in place.

Q2: What is the difference between level and decreasing term life insurance policies?

Answer:

Level Term: Cover remains constant for the entire policy term.

Decreasing Term: Cover reduces over time, making premiums cheaper.

Tip: During financial difficulties, switching from a level term to a decreasing term can reduce premiums. Later, you can switch back to level cover if needed.

Q3: Are joint life insurance policies cheaper than standalone policies?

Answer:

Yes, a joint life insurance policy is generally cheaper than having two separate policies for you and your spouse.

Consider switching to a joint policy to reduce monthly outgoings.

Q4: How can I review my insurance coverage based on affordability?

Answer:

Categorize your expenses into:

• Must-pays: Essential payments like mortgage or rent
• Like-to-pays: Optional but important, e.g., broadband or coffee
• Luxuries: Non-essential, e.g., holidays

Match your insurance cover to your affordability levels. Maximum cover is not always necessary and may be more expensive.

Q5: How do payment periods affect income protection insurance premiums?

Answer:

Payment periods determine how long you receive benefits if unable to work.

Longer payment periods (e.g., until retirement) increase premiums.

Shorter periods (1–2 years) are more affordable while still providing significant cover.

Q6: What is a deferred period and how does it affect premiums?

Answer:

Deferred period: Delay between being unable to work and receiving payments.

Longer deferred periods reduce premiums.

Consider employer benefits, savings, or partner income to extend the deferred period safely.

Q7: What are age-banded policies?

Answer:

Premiums start low and increase annually as you age.

All increases are predefined in the policy documents.

Benefit: Total premiums are usually lower than a standard income protection plan.

Q8: Can reducing cover amounts lower premiums?

Answer:

Yes, reducing cover for life insurance or income protection can significantly reduce premiums.

Regularly review your policies to ensure cover is appropriate for your needs.

Q9: How can self-employed or company directors save on insurance?

Answer:

Pay for insurance through your business using Relevant Life Policies or Executive Income Protection Policies.

Benefits:

• Premiums are tax-deductible (corporation tax savings up to 49%).
• Keeps more money in your pocket compared to personal policies.

Note: Many business owners are unaware of these options (75% surveyed in the UK).

Q10: How should I manage private medical insurance?

Answer:

Private medical insurance is annually renewable, unlike term policies.

Review your policy at each renewal to ensure your cover is still relevant.

Avoid paying for unused options, as this can increase costs unnecessarily.

Key Takeaways:

Insurance is essential – it protects against medical bills, loss of income, and mortgage default.

Reducing premiums is better than cancelling – consider switching policy types, joint coverage, shorter payment or deferred periods, and age-banded policies.

Business owners can use tax-efficient insurance policies.

Always review policies regularly to ensure cover aligns with current needs and affordability.