Life insurance is one of the best ways to protect your family in the event something happens to you, so it is certainly not something on which you should skimp. However, it’s no secret that it can cost you – even simple term policies can feature sky-high premiums. But even though it’s reasonable to want to save on your premium costs, you also don’t want to forfeit the benefits that come from having good policies.
Ultimately, the best way to ensure you are getting the most for your money is to shop around for quotes. There are innumerable life insurance companies out there peddling their rates and offering a swath of plans and pricing options. Simply taking the time to compare apples to apples will save you. In addition, there are a few other steps you can take to save big.
Read on for seven tips to save on your life insurance policy.
#1: Stick to term life insurance
While many financial planners will try to sell “whole life” or permanent life insurance policies with cash value, others recommend simply sticking to term life. Arguably, term policies are equally valuable and can save you substantial amounts in premium payments. This is because cash value in life insurance is not necessarily an investment: Any withdrawals you make from the cash value will reduce your overall death benefit. Additionally, if you take a partial withdrawal that is greater than your total premiums, the excess amount will actually be deemed taxable income.
Not to mention, the cost savings in premium payments for term versus whole life insurance is substantial. In fact, permanent life insurance can cost five or even ten times more, depending on your plan.
Nonetheless, this is not to say that you should never consider whole life insurance – it can be a valuable option for some. However, sit down with a financial planner to review the pros and cons as well as the actual monetary benefits to each option.
#2: If you’re young and healthy, avoid “guaranteed issue” policies
A “guaranteed issue” policy is riskier for insurance companies and as such, are more costly – with higher premiums and lower death benefits, in many cases. If you are generally healthy, opt for a different type of plan. A guaranteed issue policy may result in you spending more in premiums than your heirs will actually collect under your death benefit.
#3: Prioritize your health
Underlying medical issues make it difficult to find a good life insurance plan. Issues like diabetes, heart conditions and high blood pressure are among the many conditions that can induce life insurance companies to increase your premium rates. Not to mention, smokers often face an uphill battle in finding life insurance.
If you are having a hard time finding insurance due to underlying health conditions, take the time to work on your health. See your primary care doctor for some advice on how to get – and stay – in shape and address any conditions. If you can show your insurer a positive health trajectory, they will be more likely to offer a reasonable rate. (Remember: when it comes to insurance, better health equals lower risk to the insurance companies, which results in lower premium amounts.)
#4: Don’t delay
In the same spirit, applying for your insurance when you are young will generally result in a lower rate. Don’t put off the decision to apply for life insurance longer than you need to – particularly if you plan to get married or start a family.
#5: Ask for a rate recalculation if your health improves
Believe it or not, you may be able to score a lower rate even after you’ve purchased a plan. If your rates are high due to a specific health condition, ask your insurer if you can re-apply if you can demonstrate a pattern of improved health. Many insurers will consider your request if you make it in good faith.
#6: Only purchase what you need
While identifying a magic number for your benefit is virtually impossible, you can and should ask yourself how much money it will take for your family to maintain their current standard of living should something happen to you. Consider factors like your children’s education, your spouse’s income, if any, and how much it would take to pay off your home. In the beginning, avoid purchasing more life insurance than you need. If you need more down the road, you can add it – in some cases, you can do so by including a rider rather than applying for a new policy entirely.
#7: Pay your bill annually
Some insurers charge fees for monthly billing. Find out if yours does and if so, make your payments annually instead to save in the long-term. Some insurers even allow making a premium payment as a single lump sum and offer the policyholder a discount.
Don’t let debt keep you from applying for life insurance
If you’re battling debt, purchasing insurance may be the last thing on your mind. However, this doesn’t mean you should continue to delay making the financial decisions you need in order to protect your family.
If you are struggling financially, consider reaching out to a debt management company to explore debt consolidation programs that can help you recover. A reputable debt relief program can help you in a number of ways, so if you are struggling to afford a basic necessity like life insurance, consider reaching out to a company to discuss your options.
