You know that you need to obtain life insurance, but you worry about high insurance premium rates. By following a few common sense strategies, it’s possible to get the life insurance protection that you need without draining your budget. You may already be aware of some money saving strategies, but others will probably surprise you.
There are three major factors that drive life insurance rates: gender, age and your health. Women, young people and healthy people generally pay less for life insurance than men, older people and people with health related issues. You can’t do anything about your age or your gender (and lying is a bad idea). Likewise, there may be health issues that are beyond your control. However, if you’re a smoker, or obese simply because you eat too much and exercise too little, you will pay more for your life insurance policy than someone who is trim and smoke free.
Insurance agents can be useful if you don’t have a clue about what type of policy you need or the type of coverage that is best for you. However, insurance agents usually get a commission from every policy that they sell. Not only do you pay more money for your insurance policy, some agents may push you to buy more insurance than you really need. If you buy your insurance policy directly from the company, you can save money.
Think Round Numbers
Believe it or not, you may pay less money by purchasing a larger life insurance policy. That’s because many companies charge based on $1,000 (US Dollar) increments, with prices that drop once your exceed a certain level of coverage. Under such a system, your premium for a $240,000 policy might be $275.00 (US Dollars) each year, while a $250,000 policy may have a yearly premium of only $260.00 US.
Pay Annually, Not Monthly
If you can afford it, pay for your insurance annually. If you calculate the cost of those monthly payments, you’ll see that you are paying more for the convenience of making monthly premium payments than someone who pays off the premium all at once. The difference in cost can be significant, especially if you’re purchasing a larger life insurance policy.
There are two major reasons to purchase life insurance: to care financially for your loved ones after you’re gone and to cover your final expenses. If you have a thirty year mortgage, or very young children, you probably need a bigger life insurance policy than someone who is a renter or who has no children. However, you only need to buy a policy that will cover realistic expenses, such as paying off your mortgage, making sure your kids are able to afford college, or ensuring that your spouse can pay for his or her health care costs for a chronic health condition. On the other hand, if you’re single with no major assets, you may just want a life insurance policy that is large enough to cover the cost of your final expenses.
Think Term, Not Whole Life
Especially if you’re younger than age 45 or so, term life insurance rates are much lower than those for whole life insurance. That’s because whole life insurance includes an investment element, which is how policies build cash value. While whole life insurance may make sense as part of an overall investment portfolio, as a stand alone product, many whole life policies are an extravagance you can avoid. If you are worried about the term of your life insurance policy expiring, obtain a long term policy with guaranteed renewal or the option to convert to a whole insurance policy at a later date.
Just like the song says, it pays to shop around. These days, online insurance services make it easy to make side by side comparisons of life insurance policies from different companies, or even compare different life insurance polices from the same company. In some cases, the differences in premium prices for policies with similar coverage can be hundreds of dollars, so the effort is definitely worthwhile.