Opt for Term Life. Term Life insurance is cheaper than whole life insurance. Term insurance pays if you die before the policy expires. If you outlive the term of the policy, you and your family lose. The younger you are, and the healthier you are, the better your policy price as well. So–you should buy term life insurance younger for a long term to make it pay. Whole life (also known as permanent or cash value) insurance also has a time limit. If you die before the policy expires, it will pay a life insurance benefit, but if you outlive this policy, you get to collect what you have accrued in monies from your premiums, so you can get back some of that premium money, maybe more. Many say you should have a whole life policy for at least 15 years to make it pay. You can also consider cheaper options like a savings account.
No-brainers
- Only buy the amount of life insurance benefit that you need.
- If you are young and have no dependents, you have no need for a life insurance which basically provides an income for your family.
- If your have no dependents, i.e., your children are grown, and you have a good retirement plan which will take care of your spouse after your death, there is no need for you to have life insurance.
- If you have children under 18, it is estimated you will need 7 times your annual income as a death benefit.
- Make sure the rate you have for a term life insurance policy is set for the entire length of the term.
- Don’t lie about your health. If you are a smoker and tell the insurer you are a non-smoker, they can deny your death benefit if you should happen to die of a smoking-related cause of death.
- Don’t depend on a life insurance policy you get through your employer. It can be a good supplemental benefit for you, but if you should lose your job, there is no federal law that allows you to keep that policy.
Other savings from between 5% and 10%
- Buy directly though a company rather than go through an agent and save some money, or look for low-load policies which sell for little to no commission for an agent.
- Pay annually or semi-annually. If you have a monthly payment, and if it is automatically deducted from your bank account, the insurance company will charge you a handling fee.
- Don’t buy special life insurance for specific risks, like flight insurance, if you have a life insurance policy that covers you already. It’s costly and needless duplication.
- Look for group life insurance plans such as those you can get through your alumni association or from AARP.
- Save money by buying one large policy, say for $200,000, rather than two or three smaller policies for $50,000.
- Avoid riders. An accidental death or double indemnity life insurance is not worth the extra cost because the chances of predicting your exact death are slim. Other riders to avoid are the waiver of premium rider and the spousal or dependent rider.
- More is less. A $250,000 policy will cost less than a $240,000 policy. Multiples of $250,000 work better for pricing of policies.
- Check when the mortality tables come out with new estimates. The last was in 2003 and showed longer life expectancy which lowers life insurance policy rates.