Of all the things you can spend money on, life insurance is nowhere near the top of the list in terms of something that is enjoyable or exciting. But if you have a family, life insurance is an important part of your financial plan.
With that in mind, you’re probably interested in getting a good policy without spending any more than you necessary. In this article we’ll take a look at some tips that can help you to save money on life insurance premiums. Follow these tips and you’ll be able to find a policy that meets your needs without breaking the bank.
How to Save Money on Life Insurance
Follow these simple tips to save.
1. Choose a Term Life Insurance Policy
There are several different types of life insurance to choose from, but term will be the best choice for about 95% of people. Term life insurance is also simpler and easier to understand than permanent life insurance like whole or universal policies.
With term life insurance your policy will have an expiration date at which the policy and your coverage ends. If you buy a 30-year term policy your coverage will expire 30 years after the policy was opened. Whole or universal life insurance policies are considered permanent. Premiums on term policies are much lower.
Whole or universal policies combine a savings aspect with insurance. However, most people are better off keeping insurance and savings/investments separate. Of course, there are some exceptions (like if you have a special needs dependent), but the vast majority of people are better off with an inexpensive term life insurance policy. Rather than paying higher premiums for a permanent life insurance policy you can save and invest the price difference on your own and you’ll most likely wind up ahead.
Whole life and universal life insurance policies can be big money makers for the insurance companies and the agents who sell these policies, so you’re likely to have one of these plans presented to you at some point. In most cases, a term life insurance policy is better for the customer.
2. Buy Soon
Age is one of the biggest factors in determining the premium that you’ll need to pay for a term life insurance policy. The older you are, the higher your premium will be. That means if you put off the decision to buy life insurance, you could easily wind up paying more money later.
If you have a need for life insurance or anticipate the need within the next few years, take action now to get the best price before you get older.
3. Compare Prices
Premiums will vary greatly from one plan and one company to the next. Be sure to shop around and find the best rate for a plan that meets your needs.
Fortunately, there are some websites that make it easy to compare rates. When I was shopping for a new life insurance policy last year I used Quotacy. Quotacy focuses exclusively on term life insurance policies, and on their site you can get pricing from several different companies in a matter of just a few minutes. (You can read my Quotacy review here). Other sites like Policygenius or NerdWallet can also be used to compare prices.
You can also reach out to an independent agent or broker to help you find the best rate. An independent agent will be able to work with multiple insurance companies rather than being an employee of a particular company. As an independent agent, he or she will be able to help you find the best rate for your situation, rather than being limited only to the policies of a particular employer.
4. Disclose Any Medical Conditions
Throughout the process of applying for life insurance, or even just getting quotes, you will be asked a series of questions about your medical history and any existing conditions. Your medical history can impact the premium that you will pay, as well as whether you get approved or not.
It may be tempting to hide the truth about an existing condition, but that’s really not in your best interest. First of all, if you hide a condition you could be in jeopardy of not getting the death benefit, which obviously defeats the purpose of having the policy in the first place.
Also, if you disclose any existing conditions or concerns up front your agent can help you to find the best policy for your situation. If the agent doesn’t know and the condition comes up through the medical exam, you may wind up in a policy that’s not a great fit.
5. Quit Smoking
Smokers typically pay much higher premiums than non-smokers. If you quit smoking you’ll be able to qualify for a lower premium, and of course, you’ll also save money by not paying for cigarettes all the time.
6. Get the Medical Exam (if You’re Healthy)
Life insurance policies typically involve a basic medical exam in order to determine what rate you should qualify for. The better your physical condition, the lower the rate you’ll pay. These exams usually involve taking your height and weight, blood pressure, blood and urine samples, and some basic questions about your health history.
You may have the option to get a “guaranteed issue” or “simplified issue” policy that doesn’t involve a medical exam. If you are reasonably healthy you’ll be better off getting the exam. The policies without health exams typically come with higher premiums, because of the greater risk the insurance company is taking.
7. Don’t Over-Insure
If you want to keep your premiums low, don’t pay for more life insurance than you need. Of course, you’ll want to think not only about your current needs but also about the needs that you anticipate in the future. For example, if you and your spouse currently have one kid but you’re planning to have more in the next few years you may want to take that into account when deciding how much insurance to buy.
I suggest getting quotes for a few different amounts of coverage, so you can make a decision on the policy that is best for you and your family.
8. Pay Annually
Many insurance companies will offer a discount if you pay annually upfront rather than each month. In some cases, the savings can be significant. If you’re in a situation where you are able to pay for an entire year you may want to consider this to reduce the amount that you pay.
9. Ask for a Reevaluation
If your health significantly improves, or if you quit smoking after you open a policy, ask the insurance company if you can be reevaluated. This may involve another health exam. If your health does improve, if you lose weight, or if you stop smoking for a year you may be able to qualify for a lower premium without the need to open a new policy.
There are a few simple things you can do to decrease the monthly premium that you pay for life insurance. Put these tips into practice and you should be able to get adequate life insurance for as low of a premium as possible.