Life insurance is expensive, but there are some ways to make it more affordable. Here are ten suggestions to help you save money on life insurance.
Calculate your needs
This is the first essential step to save money on life insurance. It’s clear that the more coverage you buy, the greater premium you have to pay. Some people have their health insurance covered by their companies and would need less coverage than the others. Similarly, people with small children have more to worry about than those without dependents.
Everyone has a different need, so try to figure your own and find the most suitable coverage for you.
Work with an independent agent
Most agents under an insurance company will be biased and try to convince you to buy their products. However, their offer might not be the optimal choice. It is better to contact an independent insurance agent since they work with different companies. They will listen to your case more objectively and pick the best option for you.
Buy a term life insurance
The two most common types of life insurance are term life insurance and whole life insurance. Each includes a death benefit. Whole life insurance costs more than life insurance since it is lifelong and consists of a cash value. Each policy has pros and cons. However, term life insurance is more affordable. As you have calculated your needs, you may consider buying a term life policy if it suits you.
Buy more than one policy
This applies to term life insurance. People have long-term and short-term demands. Instead of buying one policy that covers all the demands, they can purchase separate ones to cater to each of their needs. This would save them a significant amount of money.
For example, Laura is a single mom in Toronto, 40. She has a ten-year-old child and a thirty-year mortgage. She is a non-smoker, and her health class is Preferred Plus. Laura wants to purchase a coverage of $700,000 so that she can pay for the mortgage, and were she to pass away prematurely, her son could receive the death benefit before he reaches twenty.
In this case, it takes Laura thirty years to pay for the mortgage, and she has to wait ten years for her son to grow up. Instead of buying a thirty-year term policy of $700,000 coverage, Laura can buy a ten-year term of $200,000 and a thirty-year term of $500,000. Take a quick calculation from Compulife and see how it works:
- If Laura purchases a thirty-year term insurance of $700,000, she has to pay $980 annually. (Canada Life Assurance Company)
- If she buys a $200,000 coverage for ten years and a $500,000 coverage for thirty years, she has to pay $948 per year. (Canada Life Assurance Company)
From the example, it’s clear that buying more will help you save money on life insurance. Again, calculate your needs carefully, and then choose the strategy that suits you the best.
Choose an income death benefit rather than a lump sum payout
Most companies will give the beneficiary the whole payout upon the death of the insured. However, some might allow the beneficiary to receive monthly payouts instead of a lump sum. This comes in handy, especially when you’re afraid your beneficiary can’t manage money well. The premium, in this case, will also be around 10% less than the normal one.
Bear in mind that not all companies apply this policy, so remember to check with your agent to sort out insurers that offer the optimal choice for you.
Avoid buying a guaranteed issue policy
Many people might opt for a guaranteed issue policy so that they don’t have to take a medical exam. This might seem unwise since this type of policy is always more expensive than a traditional one. If your health is normal, it doesn’t hurt to take a medical check-up and apply as usual.
Improve your health and apply for a rate re-evaluation
Your health affects your premium since the more health problems you have, the more the insurer will cover. Therefore, they will charge more if you have a health issue. Typically, companies will classify your health condition into four rates:
- Preferred Plus (PP)
- Preferred (25% more expensive than PP)
- Regular Plus (50% more expensive than PP)
- Regular (75% more expensive than PP)
The healthier you are, the more money you can save (this is true even if you don’t buy any insurance). Thus, you are advised to enhance your health. Once your health gets better, you might take a new medical check-up and apply for a new health rate to reduce your premium. Also, non-smokers pay less than smokers, so try to quit smoking if possible.
One “trick” here is that one month before the medical check-up, you may take exercise more regularly, drink more water and eat healthier so that your health condition gets rated better. However, it is wise to adopt a healthy lifestyle for the sake of your health, which saves more money than any tricks or tips.
Select yearly payment frequency
Most companies will charge you less if you agree to pay for the premium per year instead of per month or per quarter. This is because they can ensure their cash flow and save any operating fees. Thus, you should opt for yearly payment.
Purchase one before your next birthday
As you age, your health tends to deteriorate. Hence, premiums are expensive when you get older. If you consider buying a policy, try to buy one before your next birthday.
Consider a joint policy
As the principle “buy more, pay less” goes, most insurance companies might offer discounts for a joint policy. You might ask your spouse or partner to share a joint policy with you.
One risk here is that in a joint policy, if one of the insured dies, the other will receive the death benefit, and their contract will expire. If the remaining person wishes to buy a new policy, he/she has to pay more because of the increased age.
To sum up, to save money on life insurance, you should calculate your needs carefully, spend time talking with your agent and figure out the best plan for you.