Ways to Save on Life Insurance

Many agents may try to sell you more coverage than you need. The purpose of life insurance is to “indemnify” (replace financial loss), and what most people should be looking for is income replacement for their beneficiaries. Independent financial planners recommend the following rule of thumb: purchase an amount of coverage equal to 7-10 times your annual gross income.

When is the Best Time to Purchase Life Insurance?

Many people may feel they don’t need life insurance when they are young. While your financial needs may be lower at a younger age, the rates are also substantially cheaper when you’re young. Remember, the goal is to cover your primary assets, like your salary and house, so that if something were to happen to you, your beneficiaries would be able to persevere financially. The best advice is to lock in as much protection at a young age while your health and prices are still good.

While some companies raise their prices based on your actual age, most companies increase the price of their policies six months before your birthday.

Ways to save money on life insurance

It’s a term called “Age Nearest” in the industry, and that half-year price increase could really add up over a 20-year term policy. As above, the quicker you purchase your policy the better.

Everyone has different needs, and not one size fits all when it comes to term life insurance. While it may make sense for people in their 30s and 40s to secure a 20-year term length, a 10-year term might be more appropriate for someone nearing retirement. People who are trying to quit smoking, for example, might be best suited purchasing a shorter term and then replacing it with a longer-term policy when they qualify for non-tobacco prices. Lastly, individuals who have 30-year mortgages might want to consider a 30-year term to ensure that the house is protected throughout the period of the loan.

Companies often offer “price breaks” at certain coverage amounts (e.g., $250,000 vs. $225,000). The truth is that many people can actually pay less money for more coverage. Check how little your prices increase when you increase coverage to $250,000, $500,000, or $1,000,000.

What if I Participate in High-risk Sports or Smoke?

People who participate in high-risk sports or activities such as hang-gliding, skydiving, mountain climbing, scuba diving, and racing, or even those who like to have an occasional cigar could very well pay more money if they don’t pick the right company.

Ways to save money on life insurance even while partaking in high risk sports

Every company looks at risk factors differently and some are more liberal in certain areas than others. Speak with a licensed insurance expert and make sure they have all the underwriting criteria at their disposal and match you with the right company.

Are Work Policies a Good Deal?

While purchasing a life insurance policy through your employer is convenient, it may not be the best deal available to you. Work policies are often based on a composite profile of the employees you work with, many of whom may be less healthy than you, or have other underwriting factors that might drive up rates. These type of policies also expire if/when you leave the company. Inexpensive term life insurance policies that cover your dependents until they can live comfortably on their own are often a better alternative.

Perform a review of your life insurance policy a minimum of every three years, if not more often. Rates may be lower, and your circumstances may have changed, necessitating more or less protection. If you are replacing a policy, make sure you allow enough time to get your new policy in place, so coverages won’t overlap or lapse.

Term life insurance is the most affordable and cost-effective pure protection available, and it is typically much less expensive than a comparable whole life policy. The old axiom still rings true: “Buy Term and invest the difference.”