Calculating Your Life Insurance Policy

understanding life insurance policies

So, you’ve decided that you need life insurance. The question is, where to start?

How life insurance is calculated can seem a bit of a mystery. The first step to getting the right policy is understanding what goes into choosing a policy.

Having an idea of how much it should cost can be a great place to start. While it might seem confusing at times, there are a few key points that are important to consider.

When it comes to Life Insurance it doesn’t always pay to go for the cheapest.

Why are you getting Life Insurance?

I know it might sound a little obvious, but it is important to consider.

Are you getting it to cover funeral costs? Or maybe to make sure that your kids’ education is paid for? The answers will have a big impact on what you’ll get from the policy.

You want to be able to strike that balance between affordability and the right amount of cover for you.

Deciding your Benefit Amount

A great place to start when it comes to calculating your life insurance is deciding how much the policy will pay. In life insurance speak this is your ‘benefit amount’.

As a rule of thumb, the more you are looking for in terms of a benefit the more you will pay in terms of a premium. 

So for example let's look at the Guaranteed Life Insurance policy. If you are 30 years of age and were looking for a benefit amount of £2,000 you will be paying £3.57 per month.

You should remember though that you need to make sure that you select enough of a benefit for your family’s needs or what you want to leave your loved ones. 

Inflation is a key factor to take into account when calculating the benefit amount. While £20,000 today might get you certain things today, in 10 years’ time the purchasing power of it might be a lot lower.

When deciding a benefit amount you should take these things into consideration:

  • Your Current Age
  • The ages of your children and how long you’d like to help them out
  • Your mortgage or monthly rent amount
  • Your outgoings per month, things like childcare, food shopping and other expenses
  • Your household income. How much is your salary and other sources of income?
  • Your debts, things like bills, loans and credit cards
  • Any savings or existing cover you have

How does your Health Affect Your Premiums?

One thing that people often worry about when it comes to life insurance is their health. Bad health means expensive insurance, right?

This can be the case with certain types of policies and insurance providers.

With Smart Life Insurance you can choose our Guaranteed Life Insurance and you’ll be able to get insurance without a medical or health questions. 

With our Family Life Insurance, during the application there are a few questions in relation to your health. However, you won’t have to provide a medical to get covered.

The difference here is on the benefit amount that you can select. You’ll notice that the benefit amounts for Family Life and Guaranteed are quite different. This difference is based on there being no health or lifestyle questions.

In general, the healthier you are the more money you can expect to get from a life insurance policy.

For example, if you fall into the age category of 30 - 54 the maximum you can get from Guaranteed Life Insurance is £20,000. 

Whereas with Family Life Insurance if you are aged between 18 to 44 you could apply for a benefit amount of £750,000. This is where the two policies differ. If you have certain health conditions this may reduce the benefit amount you can choose.

This will then have an effect on the amount you pay in premiums.

How long should the policy be?

As you might imagine the longer you have a premium the more you will end up paying.

With our Smart Guaranteed Life Insurance, you are covered for the rest of your life. As long as you keep paying your premiums.

If you decide to go for Smart Family Life Insurance things are a little bit different. This depends on whether you go for an age based or level policy. With the age-based policy, you can be covered for the rest of your life.

Then, with the level policy you can choose the length of time you want your policy in force for, from between 10 and 40 years. You will be covered up until the end of your chosen term or on the policy anniversary following your 79th birthday, whichever is sooner. 

All of these policy terms do depend on you paying your premiums. If you miss two consecutive monthly premiums your policy will be cancelled.

One great thing to remember about the policies is that you’ll be covered anywhere in the world, 24/7. This still stands even if your health and circumstances change.

What stage are you at in life?

As you might have guessed your current age can have a big impact on how much you’ll be paying. The amount of benefit you can choose is directly affected by your age.

So, for example, if you’re a 32-year-old non-smoker looking for a benefit amount of £100,000 you could pay £6.89 in the first year. Your age shouldn’t hold you back from getting insurance though. There are plenty of options out there.

For example, with our Guaranteed Life Insurance you will be accepted if you’re between the ages of 30-80 and a UK resident. Not only that but your premiums are fixed when you get your policy. It’s a fixed amount for the rest of your life, if you continue paying your premiums.

What kind of add-ons would you like?

When it comes to life insurance, it’s easy to make sure you’re getting the right amount of cover. With our Smart Family Life Insurance, you can get some add-ons that could make the difference.

Add-ons like Children’s Cover, Critical Illness Cover and Accidental Cover are all available with Smart Family Life Insurance.

Your total premium amount will change based on how many of these you select and the benefit amount.

So, what’s the verdict?

Without a doubt, life insurance can be complicated at times. However, if you have a clear idea for what you might need in a policy, you’re on the right road.

It makes sense to look into life insurance and help protect those most important to you. If you have any more questions, feel free to get in contact with our UK based call centre between the hours of 8:00 am to 9:00 pm Monday to Friday, Saturday from 9:00 am to 6:00 pm and Sunday from 9:00 am to 5:00 pm.