Jane Dotson
Life insurance is often considered too expensive, with 45% of uninsured Americans stating this as the reason for not purchasing it. However, it is important to note that the majority of people overestimate the cost of life insurance. The price of a policy is influenced by various factors, including age, gender, health, hobbies, and the type of policy chosen. To reduce the cost of life insurance, individuals can maintain a healthy lifestyle, choose the appropriate type of cover, and shop around for quotes from different providers.
| Characteristics | Values |
|---|---|
| Age | Younger people pay less for life insurance than older people. |
| Gender | The cost of life insurance tends to be more for males. |
| Health | Healthy applicants with good habits typically pay less. |
| Medical History | Life insurance gets more expensive if you have serious or chronic illnesses. |
| Tobacco Use | Life insurance for smokers usually comes with higher rates than for non-smokers. |
| Lifestyle | Dangerous hobbies like skydiving can increase your premium. |
| Criminal History | A criminal record may affect your rate or even disqualify you from coverage. |
| Type of Policy | Term life insurance is usually less expensive than permanent life insurance. |
| Death Benefit Amount | Larger coverage amounts typically lead to higher premiums. |
| Riders | Adding riders to your policy, such as critical illness coverage, increases your premium. |
| Shopping Around | Compare rates and policy details from different insurance companies. |
| Joint Policy | Couples can consider a joint policy, which is usually cheaper than two single policies. |
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What You'll Learn
Compare quotes and policy details
Comparing quotes and policy details is an important step in finding affordable life insurance. Here are some key considerations:
Types of Life Insurance
Life insurance policies can be broadly categorized into term life insurance and permanent life insurance. Term life insurance covers you for a specific period, usually with a set expiration date. It is generally more affordable and suitable for those seeking coverage for a defined duration, such as the duration of a mortgage. On the other hand, permanent life insurance, including whole life and universal life policies, offers lifelong coverage and often includes a savings or investment component. This type of insurance tends to be significantly more expensive due to its extended coverage and additional financial benefits.
Policy Details and Riders
When comparing policies, look beyond the quoted price and delve into the finer details. Consider the death benefit amount, as larger coverage amounts typically lead to higher premiums. Additionally, evaluate the availability and cost of adding riders, which are additional benefits or enhancements to your policy. Common riders include critical illness coverage, accidental death benefit, and disability income protection. While these riders increase your premium, they provide valuable extra protection during major life events or accidents.
Health and Lifestyle Factors
Your health and lifestyle play a significant role in determining the cost of life insurance. Insurers consider your medical history, weight, height, and any chronic or serious illnesses you've experienced. Tobacco use, for example, typically leads to higher rates due to the associated health risks. Certain hobbies or activities, such as skydiving or racing, may also result in higher premiums as they are deemed riskier by insurers. It's important to be transparent about your health and lifestyle during the underwriting process, as this can impact your eligibility and the accuracy of your quote.
Age and Gender
Age is a critical factor in the cost of life insurance. Younger individuals generally pay less than older people because their risk of death is lower. The cost of life insurance tends to increase as you age, so it's advisable to purchase a policy earlier rather than later. Additionally, gender can influence rates, with males typically paying more due to shorter lifespans and riskier lifestyles.
Shopping Around
Don't settle for the first quote you receive. Shop around and compare quotes from multiple reputable life insurance companies. This will give you a better understanding of the market rates and help you find the most competitive prices. Online tools and calculators can assist in this process, allowing you to input your information and receive instant quotes from various providers.
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Choose term life insurance
If you're looking for an affordable life insurance option, term life insurance is a good choice. This type of insurance is significantly more affordable than whole life insurance, which can cost three times as much. Term life insurance is a simple product that covers you for a fixed period, such as 10, 20, or 30 years, and pays out if you die during that term. If you outlive the term, the coverage ends, and your beneficiaries won't receive any money. However, you can choose to renew the policy, possibly converting it to permanent coverage.
The cost of term life insurance is based on factors such as age, gender, health, and life expectancy. Generally, younger people pay less than older people as they are less likely to have health problems. Additionally, men tend to pay more than women due to shorter lifespans and riskier lifestyles. Your lifestyle choices, such as smoking or engaging in risky activities, can also impact your premium.
When choosing term life insurance, you can select from various policy lengths, such as 10, 15, 20, or 30 years, to match your financial obligations. For example, new parents might opt for a 20-year policy to cover them until their child is financially independent. You can also customize your term policy with riders, which provide additional coverage for specific situations, such as an accelerated death benefit or a waiver of premium if you become disabled.
To get the best rates for term life insurance, it's important to maintain a healthy lifestyle. This includes managing your weight, treating any medical conditions, and avoiding risky hobbies. Before purchasing a policy, shop around and compare quotes from multiple insurers to find the best price and coverage for your needs.
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Improve your health
Improving your health is one of the most effective ways to reduce the cost of life insurance. The healthier you are, the less likely it is that the insurer will have to pay out, so they will charge you less for your policy. Here are some ways to improve your health and get a better rate on your life insurance:
Maintain a healthy weight
Being overweight is linked to medical conditions with higher mortality rates, such as heart disease. Losing weight can reduce your risk profile and make you less risky to insurers, potentially lowering your premium. Eating a nutrient-rich diet and exercising regularly can help you maintain a healthy weight.
Manage your medical conditions
If you have an ongoing medical condition, such as asthma, high blood pressure, or diabetes, be sure to follow your doctor's treatment plan. This can help improve your health and reduce the risk of complications, which may lower your premium.
If you are applying for a life insurance policy that requires a medical exam, you can improve your odds of getting a better rate by being prepared. Avoid consuming too much salt, sugar, coffee, fatty foods, or alcohol in the days leading up to your exam, as these can negatively impact your blood pressure, cholesterol, and liver enzyme levels.
Stop smoking
Smoking is associated with numerous medical conditions, including cancer, and life insurance for smokers typically comes with higher rates. If you stop smoking, you may be able to get a cheaper policy. In some cases, you may need to be smoke-free for a certain period, such as 12 months, to be eligible for a non-smoker rate.
Avoid risky activities
Certain hobbies and activities, such as skydiving or racing cars, are considered risky by insurers and can increase your premium. Avoiding these activities can help you get a lower rate. However, the definition of a "risky activity" varies between insurers, so be sure to check with your specific insurance company.
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Avoid risky activities
Life insurance is about reducing risk for both the insurance holder and the insurance company. The insurance company accepts that the policyholder might die during the term of coverage, which would cost them money. To mitigate this risk, they charge the policyholder accordingly based on a risk assessment. This risk assessment takes into account factors such as age, health, and whether the policyholder engages in "dangerous activities".
Some activities that are considered risky include scuba diving, skydiving, mountain climbing, and vehicle racing. However, the activities that insurers deem risky vary from company to company. For example, one insurer might charge stock car racers more for coverage if they have made a lot of payouts related to stock car accidents.
If you engage in risky activities, you can expect to pay more for life insurance. To avoid this, you could stop participating in these activities. This may not be desirable, as people engage in these activities for fun, competition, or as a hobby. However, if your primary goal is to lower the cost of your life insurance, then avoiding risky activities is one way to do so.
It is important to note that even if you avoid risky activities, other factors such as your age, gender, medical history, and weight can still impact the cost of your life insurance. Additionally, life insurance gets more expensive as you age, so it is a good idea to purchase a policy earlier rather than later.
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Shop around
It is always a good idea to shop around for the best life insurance quotes before taking out a policy. While the monthly premium is an important consideration, it is not the only one. It is worth checking the finer details of any policy, such as whether the insurer offers the option of adding Critical Illness Cover, and if so, which critical illnesses are listed. Some insurers offer instant online quotes, which can be a quick and easy way to compare prices.
It is also worth considering writing your life insurance policy 'in trust'. A trust is a legal arrangement managed by trustees, such as family members, which pays out upon your death or a specified date. By taking this step, your life insurance policy will not form part of your estate and may not be liable to pay Inheritance Tax on the proceeds of the policy in the event of a claim.
There are several other ways to lower your life insurance rate, most of which centre on maintaining a healthy lifestyle. Being overweight is linked to medical conditions with higher mortality rates, so staying within a healthy weight range can make you less risky to insurers. If you have an ongoing medical condition, it is important to follow your doctor's treatment plan. If you are a smoker, you may be able to request to go through health underwriting again to get a lower rate if you quit smoking after signing up for your policy.
It is also worth noting that permanent life insurance policies often have significantly higher premiums than term life insurance policies, so it is worth evaluating which type of policy is best for your needs. Term life insurance covers you for a set period and is usually less expensive, whereas permanent life insurance offers lifelong coverage and a savings component that can grow over time, providing both protection and a financial asset.
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Frequently asked questions
Life insurance costs are based on several factors, including age, gender, medical history, and the amount of cover. The older you are, the more expensive it will be. Other factors such as tobacco use, risky hobbies, and criminal history can also increase the cost.
Term life insurance is usually more affordable than permanent life insurance as it is designed to provide coverage over a set period. You can also shop around for quotes, and consider writing your life insurance policy in trust to avoid inheritance tax.
Avoid assuming that life insurance is too expensive without doing your research. Many people overestimate the cost of life insurance. It is also important to select the right type of cover for your needs, as you may be paying for more cover than you require.
Maintaining a healthy lifestyle and weight can help you get better rates. If you are a smoker, quitting for 12 months can make you eligible for cheaper cover as a non-smoker. Preparing for your medical exam by avoiding salty, sugary, fatty foods and alcohol can also help improve your chances of getting better rates.
TruStage offers a variety of life insurance coverage options at different price points. You can use their affordability calculator to compare options and find one that suits your budget.
