Life insurance is one of the best investments you can make. It gives you security and peace of mind, and if you choose a permanent life insurance plan, you can even save money. It’s also true that life insurance can be expensive, or require additional account expenses. However, there are many ways to limit these expenses and be able to save on life insurance.
Read below to find out how you can save money on your life insurance without sacrificing benefits or coverage.
How Can I Lower the Cost of Life Insurance? Article Contents
Costs Associated with Life Insurance
If you have life insurance, or if you plan on purchasing a policy, you are probably aware that there are some costs involved beyond monthly premiums. These include commissions, fees, and payments for services, among others. These are of course in addition to the cost of the insurance, meaning the price for the coverage you want.
You should take all of these elements into consideration when purchasing life insurance. For example, the price for temporary and term life insurance, which has a term of a few years, is different than the price of a permanent whole life policy that will remain in effect your entire life and also generate cash value.
Sometimes insurance can have unexpected costs. These can range from maintenance and administration fees, to costs for accessing the cash value, and fees for surrendering the policy. The fees are generally minimal (though they can be more considerable for surrendering the policy), but when you add them up over the years the policy will be in effect, they can represent a large amount.
Because of this, even if you purchase a policy with low premiums, you might still end up with a plan that is expensive due to additional fees or because of poorly planned coverages and conditions. To avoid this, you have to be aware of which parts of the plan are negotiable, or how the conditions of the plan can be improved to save money and lower payments.
Saving on insurance costs can be easy if you are serious about it. You have to employ a certain level of discipline, and in some cases, be willing to make some sacrifices, or even change your lifestyle. If you think you can commit, read below to find out the best ways to pay less for life insurance.
Save Before Buying a Policy
There are two main stages to focus on when making a plan to save on life insurance. The first is the initial search and the underwriting process that precede signing a policy. This is the time when you can get the best possible conditions and establish the foundations of the policy, such as premiums and death benefit. Of course, this is also when you will have to decide if you want a term or permanent policy.
The second comes when your policy is already in effect and you have had time to try it out and make it part of your life and budget. Once you become more familiar with how it works and can reevaluate your coverage needs, then you can propose changes that help you to pay less.
Following these tips prior to purchasing a policy will provide significant savings:
Buy a policy when you are young. The best way to save on life insurance is by purchasing a policy when you are still young. The lower your age, the longer your life expectancy is, which means the insurance company assumes less risk. In fact, there are insurance policies for students, young people , and even children, which are always more attractive in terms of price.
Get quotes. Before you buy a policy, make sure to get several quotes. You can do it online, or by visiting an agent and asking for information on prices and features. A quote is a simulation that takes into consideration your needs and conditions to give an approximate cost of what you will end up paying for the policy.
Confirm the information provided to you. Insurance agents tend to present information using tables and illustrations to explain how the policy will evolve. You should make sure that the cash value amounts they show you are guaranteed and aren’t just projections.
Quit smoking and take care of your health. Tobacco is one of the biggest factors in the cost of life insurance. If you are a smoker, you automatically pay more. Consequently, it’s in your best interest to quit smoking and eliminate this penalizing factor from your policy.
As you are aware, the underwriting process for life insurance is complicated and can be drawn out, especially for permanent policies. You are required to provide proof of your health, especially if you have what are known as preexisting conditions. These refer to prior illnesses or ailments that could put your future health at risk. You are also required to explain your habits and lifestyle. If you want to lower your premiums, lose weight and eliminate any dangerous behaviors that increase your risk of death including poor diet, drug use, and high-risk sports. The most important thing to do during the underwriting process is to be honest and not hide any information. The biggest mistake people make when purchasing life insurance is lying to the insurance company, as they may cancel your policy if they find out.
Some people think that they might not pass the medical exams, so they purchase guaranteed acceptance life insurance. This should be a last resort because they are much more expensive. Don’t be afraid to take the required medical exams, you will see it’s easier than you might think.Purchase a group plan. Find out if your employer offers group plans. These are collective policies that are sometimes paid for completely by your employer, or charge very low premiums that are deducted from your salary. The coverage amounts are limited, but they can be a way for you to get your first policy, and later on you can convert them into a plan with more comprehensive coverage.
Start with term insurance. If you are young, your best option to save money might be purchasing a term life insurance plan with level premiums. Since your risk is low, they will offer more accessible premiums that will be easier to pay. In addition, you can use the policy during the years it is in effect, and then later you can automatically renew it or convert it to a permanent plan. At this point the company will recalculate your premiums based on your current age, but you can skip the underwriting process and will have a permanent policy without the hassle of qualifying again.
Pay yearly. Though it might sound odd, it’s better to purchase a plan with an annual premium, or even a single payment. You will have to make a bigger sacrifice when paying premiums, but then you won’t have to worry about monthly premiums and be able to use your income as you see fit. In addition, insurance companies tend to tack on more fees when you pay monthly, meaning that you’ll save on these if you pay yearly. There are even insurance companies that offer discounts for choosing the annual premium option, so make sure you are well-informed prior to purchasing your policy.
Only purchase the coverage you need. Many people make the mistake of being over insured. They purchase more coverage than they actually need, meaning they pay higher premiums than is advisable. Do your best to make the most accurate calculation of how much money you’ll need in the future and try to adjust the coverage to meet your needs.
Look for discounts on specific coverage. Many companies offer very competitive prices for specific coverage amounts. This can mean that sometimes it’s less expensive to purchase coverage for $250,000 than for $200,000. This is because you have to exceed a certain amount of coverage in order to qualify for the discount. Speak with an agent to find out what options are out there because you will save money and get a higher death benefit for your beneficiaries.
Lower the Costs of Your Current Life Insurance Plan
If you already have a life insurance policy that has been in place for some time, now might be a good time to make some adjustments that will allow you to pay less. Some strategies include:
Assessing your needs. Have the discipline to periodically review your insurance needs. A good rule of thumb is to review your coverages every two or three years, as your financial situation, savings, debt and needs of your family evolve. If you see that you can reduce the amount of coverage you’ll need in the future, don’t hesitate to call your insurance company to renegotiate the amount and pay lower premiums. If you think that you will need more protection, don’t purchase another plan. It is cheaper to renegotiate your current plan and get more coverage. As we’ve discussed above, sometimes increasing the death benefit can cause your premiums to decrease.
Reassess your health. Are you in better health than when you purchased the policy? Has your cholesterol gone down? Have you gotten your blood pressure under control? Did you quit smoking or make lifestyle changes? Talk to your insurance company to get them to reassess your situation.
Eliminate clauses. Review your policy and decide if you have purchased any unnecessary clauses. Additional clauses tend to make policies more expensive, so eliminating them will save you money.
Purchase insurance packages. If you have the chance, group your policies into packages that include life, home and car insurance. This is the best way to lower your overall cost of insurance.
As you can see, there are many ways to pay less for life insurance. Analyzing your situation carefully and consulting experts will ensure you make the best decision when purchasing a life insurance plan for your loved ones.