How Can I Find the Money?

Life assurance premiums can be quite expensive and you may wonder if you can afford to maintain the payments, especially if they rise over time. By doing some research before you choose your insurance policy, you may be able to avoid sudden increases in your premium in the future so that you can plan your financial outgoings with more accuracy. If you already have an insurance policy and you are struggling to make the payments, there are steps that you can take to ease your burden.

Budgeting for Premiums

Perhaps the best advice, if you are currently facing hard financial choices such as how to meet your premium, is to devise a budget. By making a list of your regular incomings and outgoings, you can pinpoint any areas of your expenditure in which you can make cutbacks. You can also prioritise payments for bills, food and utilities and see how much you have left over for other things, including your life assurance premiums. Sometimes, by making small changes in your expenditure, you can redistribute your disposable income to make your outgoings more efficient. For example, if your premium payment was £10 per month, you might be able to make this affordable by sacrificing one latte per week, if that is your particular indulgence.

However, if making changes in your expenditure does not result in the freeing up of funds to pay for your existing premium, you could always attempt to negotiate your terms with your insurance company. For example, some insurers may allow you to alter your policy agreement to make your premium cheaper, or even to cash in your policy if you really cannot afford the premiums. However, this sort of action would result in a decreased lump sum for your loved ones when you die, but you may take the view that some pay-out is better than none.

Premium payments can become problematic if you have a renewable life assurance policy which covers the whole of life. Because the terms are reviewed regularly, premium payments can jump up in cost quite suddenly during the review period. If you are yet to choose a life assurance policy, and you are deliberating your choices with regards to a tight budget, you may wish to avoid this type of policy.

However, renewable policies do tend to be cheaper initially than guaranteed policies. Guaranteed policies have set premiums which do not change over time. However, the downside to this is that the payments tend to be quite expensive from the outset. Renewable policies, on the other hand, start of quite cheap and then increase in cost regularly after the first ten years of the policy.

So your choice of whole of life insurance really depends on the accuracy of your predictions for your future finances. If you are certain that your financial situation will be better in the future, then you may think it better to take the option of a renewable policy. If, however, you have a good income now, and can predict a steady income in your future years, you may wish to invest in a guaranteed policy.

There is another type of policy that you can take out if you are currently on a budget, however. You can take out a convertible level term insurance policy, which means that you can pay the cheaper rates associated with level term insurance, but leave open the option of converting it into a whole of life policy at a later date. This provides you with a very flexible policy, allowing you the most economic payment solution with which to begin life assurance.

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