The sobering statistic is around one child in 29 loses a parent before they grow up. Sadly, the grief and misery are often compounded by a loss of income causing financial crisis – but life insurance is one of the cheapest ways to protect your family’s finances if the worst happens.
You are protected if your provider goes bust
As taking out life insurance is usually a long-term decision, many things can happen during the lifespan of the policy, and while your insurance company may be doing well now it could be a different scenario 20 years down the line. If something happens, here’s how it would affect you:
If your insurer went bust. If your provider goes bust, the Financial Services Compensation Scheme (FSCS) will try to find another insurer to take over or issue a substitute policy. However, if you’ve ongoing claims, or need to claim before a new insurer is found, the FSCS should ensure you’re covered (always check new insurers are on its register to make sure they’re UK registered). For more see the insurance section of our Savings Safety guide.
If your broker went bust. The only payment you’re likely to make to a broker will be the fee for arranging the policy, which is often no more than £25.In the unlikely event your broker went bust after you paid it but before your insurance was arranged, the chance of you getting your money for the fee back is slim. Saying that, the FSCS would be able to help with any premiums lost as a result of a broker going bust, as these payments are ring-fenced, but this is unlikely to extend to broker fees in this instance.
How to slash the cost of life insurance
The worst way to get life insurance is by going straight to an insurer, here you pay full price and don’t check whether it’s the cheapest on the market. So what many people do – which makes them feel they have the best deal – is to use a comparison site. It scours the market to find you the cheapest deal. And, indeed, you feel you’ve saved big.
However, what comparison sites don’t tell you is they’re a taking a huge whack of commission by doing so. But there is a way to slash costs by using a discount broker…
The top discount brokers
Here – as long as you don’t get advice – you can buy a policy through them (usually for a fee of £25) and they rebate all the commission they get from the insurer into your policy (so you basically get a discount hence the name discount broker). So, while the fee is a one-off £25, you can save £1,000s over the life of policy. It’s an easy win.
Having reviewed the main 10 discount brokers on the market for a range of quotes, here are our top brokers:
Cavendish Online is an online broker with a £25 fee, which rebates all commission. This broker also promises to price match its competitors.
Moneyworld is another online broker (with a £25 fee) and promises to price match its competitors. It also rebates all commission
Money Minder is also an online broker with slightly higher premiums and a £25 fee, which rebates all commission.
Our suggestion is to always check the top two and then add in the rest if you’ve time. Remember if you’re not sure what you’re doing, consider getting advice.
You may wonder why the prices below are slightly different when each rebates all of the commission. It’s because each discount broker has a different deal with the insurers and therefore the prices aren’t always the same
How to complain about your insurance provider
The insurance industry doesn’t have the best customer service reputation and while a provider may be good for some, it can be hell for others. Common problems include claims either not being paid out on time or at all, unfair charges, or exclusions being hidden in the small print. It’s always worth trying to call your provider first, but if not then.