Affordable Life Insurance: Tips To Save On Premiums

Life insurance is a contract in which a policyholder pays premiums in exchange for a lump-sum death benefit that is paid to the policyholder's beneficiaries. The cost of life insurance depends on several factors, such as age, health, medical history, and lifestyle. The coverage amount and policy type also play a significant role in determining the cost of life insurance.

There are two main types of life insurance: term life insurance and permanent life insurance. Term life insurance covers a specific time period and is generally more affordable. Permanent life insurance covers your entire life and usually builds cash value over time but tends to be more expensive.

- Choose term life insurance if you are looking for a cheaper option.

- Opt for a policy that requires a medical exam, as insurers tend to offer lower premiums if you are in good health.

- Buy a policy as soon as you need it, as insurers reserve their best rates for young and healthy applicants.

- Compare rates from multiple insurers to find the most affordable policy.

- Improve your health by maintaining a healthy weight, eating a balanced diet, and exercising regularly.

- Manage any pre-existing medical conditions by following your doctor's advice and taking medication as directed.

Choose term life insurance

Term life insurance is the simplest and cheapest type of policy and is often sufficient for most people. It is designed to cover you for a set number of years, typically coinciding with the period in which you have financial dependents or obligations, such as paying off a mortgage or raising children.

Key Features of Term Life Insurance

• It is generally the most affordable way to buy life insurance.
• Term life insurance policies are available for specific lengths of time, with rates locked in for that period. Common term lengths include 10, 15, 20, 25 and 30 years, with some companies offering longer terms of up to 40 years.
• There is no cash value in a term life insurance policy, meaning there is no savings element that can be withdrawn or borrowed against.

How Term Life Insurance Works

When you buy term life insurance, you choose the length of the term and the coverage amount. The policy's annual costs remain the same for the duration of the term, after which you can renew the policy, but at higher rates. If you outlive the policy without renewing, it expires, and you do not receive any premiums paid unless you have a return-of-premium policy.

When to Choose Term Life Insurance

Term life insurance is ideal if you need life insurance for a specific period. For example, if you have young children and want to ensure funds are available for their college education, you can buy a term life insurance policy for that length of time. It is also a good option if you need a large amount of life insurance but have a limited budget, as it generally has lower rates per thousand of the death benefit compared to permanent life insurance.

Convertible Term Life Insurance

If you think your financial needs may change, you can consider "convertible" term policies. These policies allow you to convert to permanent insurance without a medical examination, although you will have to pay higher premiums.

Factors Affecting Term Life Insurance Rates

When determining term life insurance rates, insurers consider factors such as age, health, family health history, nicotine and marijuana use, history of substance abuse, driving record, and certain hobbies or activities.

Opt for a medical exam

Opting for a medical exam can be a great way to get affordable life insurance, especially if you are relatively healthy. The exam is similar to a physical check-up, and you can schedule it at a time and place that suits you. A technician will ask about your medical history, record metrics such as your blood pressure, height, and weight, and take samples to check your nicotine, cholesterol, and glucose levels. This information is then used by the insurer to set your premium.

By choosing a policy that includes a medical exam, you can often benefit from lower premiums. Without these details, the insurer has less information to work with and must take on more risk. For this reason, life insurance that doesn't require a medical exam tends to be more expensive.

If you are generally healthy and don't have any pre-existing conditions, taking the medical exam route can be a strategic way to secure a more affordable life insurance plan. It is worth noting that some insurers may also use past medical records or ask additional health questions to supplement the exam and more accurately assess your health.

While the exam can help lower costs, other factors that influence life insurance rates include your age, lifestyle, and coverage goals. The younger and healthier you are, the more likely you will be able to secure lower premiums.

In summary, opting for a medical exam as part of the life insurance application process can be a smart financial decision, especially if you are in good health and want to take advantage of lower rates.

Buy a policy early

Life insurance is a crucial financial safety net for your loved ones, and it's best to buy a policy as early as possible. Here's why:

Lock in Lower Rates

Younger people generally enjoy better health, and life insurance companies reserve their best rates for applicants who are young and healthy. As you age, your risk of developing health issues increases, and your life expectancy decreases, making insurance more expensive. By purchasing a policy early, you can lock in lower rates for the life of the policy. This is especially beneficial if your health deteriorates over time, as your premiums will remain the same.

Protect Your Loved Ones Sooner

The younger you are, the more affordable life insurance premiums tend to be. Starting early ensures that you lock in lower rates and protect your loved ones sooner. This is particularly important if you have financial dependents or shared financial obligations, such as a mortgage. Life insurance can provide financial security and peace of mind for your family, and buying a policy early means they'll be protected for a more extended period.

Avoid Health-Related Expenses

When you're young, you're less likely to be dealing with health issues, which can significantly drive up the cost of insurance. Chronic conditions like diabetes and hypertension can start to develop early in life, and buying a policy before these conditions arise will result in lower premiums. A term insurance policy is designed to cover your future expenses and liabilities, and it's more cost-effective to purchase it before any health issues arise.

Take Advantage of Long-Term Growth

Permanent life insurance policies, such as whole life insurance, offer a cash value component that grows over time. The earlier you purchase this type of policy, the more time the cash value has to accumulate. This can be particularly advantageous if you plan to use the cash value to supplement your retirement income or as a down payment for a home.

Ensure Coverage Despite Health Issues

Waiting to purchase life insurance can impact your ability to get a policy if serious medical conditions develop. If a significant health issue arises later in life, an insurance underwriter may "rate" your policy, resulting in higher premium payments or even a declined application. Buying a policy early ensures you can obtain coverage despite any future health issues.

In summary, buying life insurance early is a smart financial move. It allows you to lock in lower rates, protect your loved ones sooner, avoid health-related premium increases, take advantage of long-term growth potential, and ensure you can obtain coverage despite any future health issues. By purchasing a policy early, you can rest assured that your loved ones will be financially secure, no matter what the future holds.

Avoid tobacco and nicotine

Using tobacco and nicotine-based products is linked to a host of health issues, such as cancer, respiratory disease, and diabetes. According to the American Lung Association, smoking is the leading cause of preventable death in the US. Because of this risk, smokers almost always pay more for life insurance. Depending on the insurer, you may be considered a smoker if you use cigarettes, vaping devices, cigars, pipes, chewing tobacco, and nicotine patches or gum.

To qualify for non-smoker rates, you typically need to prove you've been smoke-free for at least 12 months. Some insurers require you to be tobacco-free for up to five years to be considered a non-smoker. If you're in the process of quitting but need life insurance now, you can go ahead and apply for a policy. Your coverage will be priced at smoker rates, but you might be able to request a review of your rates once you've passed your insurance company's time period for being considered a smoker. This time frame varies by insurer, so it's worth factoring in when comparing life insurance companies.

If you're looking to quit smoking, here are some tips to help you get started:

• Set a quit date and stick to it. Choose a date that is realistic and give yourself enough time to prepare.
• Tell your friends and family about your quit date and ask for their support.
• Remove all tobacco products and smoking paraphernalia from your home, car, and workplace.
• Identify and avoid triggers that make you want to smoke, such as certain people, places, or situations.
• Drink plenty of water and juice to help flush nicotine out of your system.
• Keep yourself busy by finding activities to distract yourself from cravings, such as exercising, reading, or spending time with non-smoking friends.
• Consider using nicotine replacement therapy, such as patches or gum, to help reduce cravings.
• Join a support group or smoking cessation program to connect with others who are also trying to quit.
• Reward yourself for reaching milestones, such as going one week or one month without smoking.

Quitting smoking can be challenging, but it's definitely worth it for your health and your wallet! Remember to be patient with yourself and don't give up if you have a slip-up. Most people make multiple attempts before quitting for good.

Only buy what you can afford

Life insurance is an important safety net for those who depend on you financially. However, it's crucial to only buy what you can afford to avoid unnecessary financial strain. Here are some tips to help you purchase life insurance within your means:

Determine How Much Coverage You Need

Start by calculating your long-term financial obligations, such as mortgage payments, college fees, and future expenses. Also, consider your current income, savings, and assets. By assessing these factors, you can estimate the coverage amount required to support your loved ones in your absence.

Choose Term Life Insurance

Term life insurance is the most affordable option as it covers a specific time period, usually when you have financial dependents or obligations. It provides financial assistance to the beneficiary in the event of your death during the policy term. The money can be used for income replacement, future expenses, and burial costs.

Get Quotes and Compare

Obtain quotes from multiple insurers for the coverage amount you need. Compare the premiums, benefits, and additional features offered. By shopping around, you can find a policy that fits within your budget without compromising on the required coverage.

Purchase Only What You Can Comfortably Afford

It's essential to be realistic about your financial situation. Opt for a policy with a premium that you can comfortably pay without straining your budget. Remember, if you have dependents, some coverage is better than none, and you can always increase your coverage later when your financial situation improves.

Consider Rounding Up Your Coverage

In some cases, insurers offer discounts for specific coverage tiers or thresholds. For example, you might get a better rate for purchasing $250,000 in coverage instead of $200,000. Ask insurers about their "benefit tiers" to see if rounding up your coverage can lead to cost savings.

Review and Reassess Regularly

Life insurance needs can change over time as your financial situation evolves. It's recommended to review your policy annually or whenever you experience significant life events, such as marriage, the birth of a child, or a change in your financial circumstances. This ensures that your coverage remains adequate and aligned with your current needs.

By following these guidelines, you can purchase life insurance that provides the necessary financial security for your loved ones without straining your budget. Remember to be prudent and only buy what you can afford to maintain over the long term.

Frequently asked questions