Should You Get Discount Life Insurance?

Discount life insurance is actually a marketing method used by brokers to attract more clients. Here’s how it works: insurance brokers make money by selling insurance policies to individual clients. They earn money through commissions or by charging the clients themselves a fee for the handling of their policy and the legwork involved.

Discounted insurance explained

When we say discount life insurance, we’re not referring to the coverage of the insurance policy itself. Instead, we look at the financial relationship between the middleman, payee and insurance company. Often, brokers receive some amount of remuneration whenever they are successful in selling the commodity to new clients.

To sweeten the deal, a discounted insurance policy would have a lower premium than non-discounted term or whole life insurance policies. How is this possible? Instead of using the remuneration for themselves, the brokers ‘split’ the money between their outfit and individual clients. The result? Some of the remuneration from the insurance company given to the brokers are returned, to help pay for the monthly premiums.

Why do brokers do this?

The answer to this question is really just survival. Insurance companies and brokers have to deal with competition. And in the globalized world economic arena, everyone is subjected to the same mode of ultra-competition. Discounts allow the brokers to have more clients than those who pocket the commissions completely.

How much can you save?

You can actually save up to £120 a month if you go for discount life insurance. If the original monthly premium was £170 per month, a discounted policy would pay for the £120, and you end up with a nominal fee amounting to only £50.

Let’s expand this horizon a bit more. If you pay the same amount of money for about 30 years, the total amount that you would have invested in your own policy would amount to about £18,000. Where’s the positive aspect in all this?

The return of your investment in your insurance policy would definitely be larger than the £18,000 you initially invested. This is possible because both the advisor/broker and you are profiting from the commission given by the insurance company.

In a way, this practice stabilizes the relationship between the broker and the insurance client. No longer will the broker receive a very generous reward for half a day’s work. The competition is sharpened between the brokers, and people now have more choices when it comes to getting their insurance policies. Think discounted policies are right for you? Time to get that lowered monthly premium today. GP