Get Affordable Term Life Insurance: Tips And Tricks

Life insurance is a crucial financial safety net for you and your loved ones. While finding affordable coverage is a priority for many, it's important to remember that the cheapest option may not always be the best. Low-cost life insurance often comes with limited benefits and stringent conditions that could impact your family's financial security. Instead, it's advisable to balance cost and coverage by comparing quotes from multiple reputable insurers. Term life insurance is a popular choice for those seeking lower premiums, as it provides coverage for a specific period, such as 10, 20, or 30 years. However, whole life insurance, though more expensive, offers coverage with no time limit. To get cheap term life insurance, consider buying a policy when you're young, avoiding risky activities, maintaining a healthy lifestyle, and quitting smoking. Additionally, evaluate group life insurance through your employer, which often offers basic coverage at reduced rates.

Compare quotes from multiple providers

Comparing quotes from multiple providers is an essential step in finding the best and most affordable term life insurance policy for your needs. Here's a detailed and instructive guide on how to effectively compare quotes from different life insurance companies:

Assess Your Needs:

Before comparing quotes, it's crucial to understand your specific needs and goals. Determine whether you require term life insurance or permanent life insurance. Term life insurance is ideal if you only need coverage for a specific period, such as until your children finish college or while paying off a mortgage. On the other hand, permanent life insurance offers lifelong coverage and includes a cash value component. Consider factors like your financial obligations, income replacement, and future expenses to decide on the amount of coverage you need.

Research Multiple Life Insurance Providers:

Explore life insurance companies that offer the type of policy you require. Compare these providers based on customer satisfaction ratings and their financial strength. Reputable third-party agencies like J.D. Power and AM Best provide insights into how these companies typically interact with their clients and their financial stability. This helps ensure that the insurer is reliable and capable of fulfilling their commitments.

Compare Life Insurance Options:

Obtain quotes from multiple insurers and carefully compare their offerings. Look at the type of policy, coverage amount, and death benefit each insurer offers. Since insurers evaluate risk factors differently, shopping around can help you find the most cost-effective option. Consider working with a broker who can shop around on your behalf and provide expert advice tailored to your specific circumstances.

Apply for a Policy:

Once you've selected an insurer and decided on the type of insurance, proceed with the application process. You may apply through a licensed agent or online, depending on your preference. Keep in mind that the application may require a medical examination, especially if it's a permanent life insurance policy. Remember that you'll have a "free look" period after purchasing the policy, typically ranging from 10 to 30 days, during which you can thoroughly review the policy and ensure it aligns with your expectations.

Choose a term life insurance policy

Term life insurance is a good option if you need life insurance for a specific period of time. For example, if you have young children and want to ensure that there will be funds to pay for their college education, you might buy 20-year term life insurance. Or if you want the insurance to repay a debt that will be paid off in a specified time period, buy a term policy for that period.

Term life insurance is also a good option if you need a large amount of life insurance but have a limited budget. Term life insurance is generally the cheapest way to buy life insurance. It is designed to provide money for your dependents when they need it most—during your income-earning, child-rearing, college-saving, mortgage-paying years.

When choosing a term life insurance policy, you have two main decisions to make: the length of the term and the coverage amount. Term life insurance is typically available in lengths of 10, 15, 20, 25 and 30 years. Some companies offer longer terms of 35 and 40 years. The most common term life length purchased is 20 years.

If your family’s financial needs stretch past the typical term life lengths, consider a permanent life insurance policy, such as universal life insurance.

When choosing the length of a term life insurance policy, consider the length of the debt or situation you want to cover. For example, if you’re buying term life to cover the years until your children are through college, and that’s in nine years, you might pick 10-year term life insurance. If you just bought a house and took on a 30-year mortgage, you’re likely looking at 30-year term life.

The coverage amount you choose will depend on your income, the number of dependents you have, and the specific debts you want to cover. A good rule of thumb is to multiply your annual income by 10. Another method, called the DIME method, is to add up your debt, your income for the number of years you’ll have dependents, the balance of your mortgage, and the cost to send your children to college.

Keep in mind that premiums are lowest when you are young and increase upon renewal as you age. Some term insurance policies can be renewed when the policy ends, but the premium will generally increase. Some policies require a medical examination at renewal to qualify for the lowest rates.

Buy when you're young

The younger you are, the lower your life insurance premium will likely be due to your probable lack of serious medical conditions. For example, a 25-year-old woman in good health can expect to pay $17.91 per month for $500,000 of coverage over 20 years. By contrast, her 45-year-old friend with the same health profile would pay around $46 per month for the same coverage. That's more than two and a half times the cost for someone younger.

With term life insurance, the premium won't increase for the length of the term you choose when you purchase your policy. When you are young and healthy, your premiums can be locked in at a lower rate, which can result in potential premium savings over time. It's also easier to qualify for life insurance when you're younger since you probably won't have any pre-existing conditions.

The average cost of term life insurance is $31 a month for a healthy 20- or 25-year-old. The younger you are, the better life insurance rates you'll get. Young adults can enjoy high coverage amounts and low premiums.

If you're a young adult, consider the following situations when deciding whether to take out life insurance:

• You have dependents, such as children or a spouse, who rely on you financially.
• You have large debts that you don't want to pass on to your loved ones.
• You're in good health, so you can lock in a policy at a low rate.
• You own a business, and want to ensure it can continue to run smoothly if you die unexpectedly.

Avoid dangerous activities

Dangerous activities and hobbies can have a significant impact on your life insurance premiums. If you engage in high-risk activities, insurers may charge you higher premiums, apply exclusions or restrictions, or even deny you coverage altogether. Therefore, it is crucial to be aware of how your lifestyle choices can affect your insurance rates and take steps to mitigate these risks.

Firstly, it is important to understand what constitutes a dangerous activity. Insurers broadly agree that certain activities are hazardous, including but not limited to scuba diving, mountain climbing, skydiving, vehicle racing, and extreme sports such as white water rafting and bungee jumping. Even if you only participate in these activities occasionally, they can still be considered risky. For example, rock climbing at an indoor climbing wall is unlikely to affect your insurance rates, but outdoor rock, mountain, or ice climbing will be viewed differently by insurers.

The frequency and experience of the policyholder are also taken into account. The more often you engage in a dangerous activity, the higher the risk, and consequently, the higher your insurance rates are likely to be. On the other hand, having more experience and qualifications in a dangerous activity can work in your favour, as training and certification demonstrate a commitment to safety, which may help keep your rates more affordable.

Your health and medical history are also crucial factors. Pre-existing medical conditions, especially when combined with participation in dangerous hobbies, can result in higher premiums or even lead to a decline of coverage. Insurers will also consider the likelihood of a medical emergency occurring while engaging in a dangerous activity, as this increases the risk of an accident or fatality.

If you are planning to start a dangerous hobby, it is advisable to purchase life insurance beforehand and lock in lower rates. Most life insurance applications will ask if you intend to engage in any hazardous activities in the near future, so it is essential to be truthful on your application to avoid problems down the road. If you already have a policy and have started a new high-risk hobby, notify your insurer, as this may affect your current coverage.

In some cases, insurers may apply a rating or an exclusion to your policy. A rating means you pay an extra amount per $1,000 of coverage per year. For example, if you have a base policy of $1,000 for $1,000,000 of coverage and receive a rating of $2.50 per $1,000 of coverage, your total premium will be $3,500. An exclusion means you pay the standard rate, but any death resulting from the dangerous activity will not be covered.

It is worth noting that not all insurance companies treat high-risk activities the same way. While one insurer may decline coverage or apply a heavy rating, another may view you as a lower-risk client. Therefore, it is beneficial to use an experienced broker who can help you find the right company and secure the best rates for your specific circumstances.

Evaluate your employer benefits

Evaluating your employer's benefits is an important step in determining your life insurance needs. Here are some key points to consider when reviewing your employer's life insurance offerings:

Convenience and Savings

Employer-provided life insurance can be a convenient option as it is often available as part of your benefits package. It can also result in savings as employers usually pay most or all of the premiums, leaving you with more disposable income. This is especially beneficial if you are just starting in your career and may not have the funds for a personal policy.

Acceptance and Early Protection

Most employer-provided life insurance plans are guaranteed, meaning you will be accepted regardless of any serious medical conditions. This can provide early protection for those who depend on you financially. However, the coverage amount is typically calculated as a multiple of your annual salary or linked to your position in the company, and may not be sufficient for your needs.

Added Coverage and Riders

As your life events and needs change, you can usually increase your coverage by paying an additional premium. Employers may also offer riders, such as additional protection for certain degrees of illness and disability, providing extra peace of mind.

Coverage Limitations and Loss of Coverage

While employer-provided life insurance can be a great benefit, it is important to remember that it usually only applies to the employee and not their spouse or children. Additionally, the coverage ends when you leave the company, and converting to an individual policy can be more expensive.

Insufficient Coverage and Risk of Loss

Basic employer-provided life insurance may not offer enough coverage, especially if you have dependents. Experts recommend having coverage worth five to ten times your annual salary. If your employer-provided insurance does not meet your needs, consider purchasing a supplemental policy.

Alternative Options

The younger and healthier you are, the more likely you are to find better rates outside of your employer's plan. You can explore guaranteed level-premium term life insurance, which offers the same premium rate throughout the policy term.

In summary, taking advantage of employer-provided life insurance can be a wise financial decision, but it may not be your only source of coverage. Evaluate your needs, consider any additional coverage options through your employer, and don't be afraid to shop around for supplemental policies to ensure you have adequate protection.

Frequently asked questions