Although there is no magic wand that can reduce mortgage life insurance rates to practically nothing there are some simple steps that can be taken to ensure they are as low as possible. Unfortunately, it is sometimes the case that to lower rates it is necessary to lower the level or scope of protection.
Tip One – Only cover the mortgage amount outstanding
The purpose of mortgage protection life insurance is to cover a mortgage loan and therefore the sum insured should be set equal to the amount of debt currently outstanding. Thus, for an existing mortgage it is likely that some of the initial debt has been repaid and therefore only the current amount of debt needs insuring and not the initial loan amount.
Tip Two – Set the term length accurately
As with the amount of cover taken out, if mortgage life cover is taken out for an existing loan then the term length should be set equal to the number of years remaining on the loan and not how long the loan was initially taken out for.
Tip Three – Choose reviewable rates
It is usually the case that plans with reviewable rates start with much lower monthly premiums. However, it is likely that the insurer will increase rates over time and it may not work out cheaper over the entire life of the policy. Reviewable rates might make sense for those who expect their incomes to rise markedly over time.
Tip Four – Exclude critical illness cover
With mortgage protection life cover it is possible to include critical illness insurance which means that the plan would also payout if the plan-holder were to suffer a serious illness, such as cancer. However, taking out life insurance and critical illness can more than double rates as there is far more risk of becoming ill than passing away.
Tip Five – Use an independent broker
Independent brokers are free to select a plan from a large panel of insurers and can therefore select the most competitively priced policy given the demographic of the potential plan-holder. It is also the case that brokers are able to use their significant purchasing power to obtain lower rates from the insurers.
Lastly you can discuss with your advisor about how many life insurances can you have, as it getting more than one insurance might help you with tax relaxations and lower premium rates.