Strategies to Reduce Life Insurance Costs - 13 Shrewd Methods to Lower Your Premiums
Unleashing the Secrets to Slashing Life Insurance Costs
When hunting for life insurance, everyone's main objective is to save money and snag the best policy on the market. Navigating numerous insurance companies, banks, and financial institutions can feel daunting, but don't let that deter you. Here's a bunch of thrifty hacks to help you score significant savings on your next life insurance policy.
13 Savvy Moves to Reduce Your Life Insurance Bill
1. Don't settle for the first quote
Resist the temptation to jump at the first quote you receive. Shop around and compare rate quotes from at least five to ten different companies before making a final decision.
2. Apply to at least two insurers
Taking the life insurance exam is free. Once you have identified companies with the most competitive rates, submit applications to at least two of them. If one of the companies tries to boost the price during underwriting, you'll have room to negotiate for a better deal or switch to the other insurer.
3. Opt for term life insurance
For families with dependent children, term life insurance is typically the best choice. You'll receive the most coverage for the lowest price.
4. Get in shape
Shedding a few pounds or dropping your blood pressure can bump you up to a better rating class, potentially saving you hundreds or even thousands of dollars. However, don't wait to buy life insurance until you reach your ideal weight. You can always reapply later to take advantage of the lower rate.
5. Pay annually
Insurance companies offer discounts when you pay your premiums annually instead of monthly. You could save anywhere from 3% to 7% by making one annual payment rather than multiple monthly installments.
6. Prepay the entire policy upfront
Prepaying your entire life insurance policy can result in a juicy discount. In one scenario, a client prepaid for all 15 years in a single payment, snagging a significant savings.
7. Steer clear of Return-of-Premium (ROP) policies
These policies, also known as "get your money back if you don't die" policies, are roughly twice as expensive as term life insurance and come with a zero return on investment. Instead, invest your money on your own and purchase term life insurance.
8. Quit smoking
Most insurance companies demand that you go tobacco-free for at least a year to qualify for non-smoker rates. Don't hold off on buying life insurance while you work on quitting completely. Buy a policy now, and then reapply when you've been tobacco-free for 12 months to nab the lower rate.
9. Convert your current policy
Many term policies come with the option to convert some (or all) of your coverage to a permanent, no-lapse guarantee universal policy. Converting your current policy could save you a bundle if you've developed a significant health issue during the policy's term. You may even be able to secure term life insurance without a medical exam under some plans. But not all insurance companies require a medical exam for applicants over 40.
10. Buy when you're young
Since life insurance rates climb with age, it's advantageous to purchase coverage while you're still young and in good health. The saying goes: You'll never be younger and as healthy as you are today, so life insurance will never be cheaper.
11. Ask for reconsideration
If an underwriter bumps up your rate due to a particular issue like your build or health history, don't give up. Ask your agent to lobby on your behalf and fight for a better rate. It won't work every time, but it's worth a shot.
12. "Ladder" your coverage
Instead of purchasing one massive 30-year policy, try buying two 20- and 10-year policies. With this approach, you'll have full coverage for the next 20 years when you need it most (for example, as your children are still growing up and your mortgage is large), and then you'll have a smaller policy for the next 10 years. This strategy can save you a pretty penny over the life of the policy, and if you ever face a financial crunch, you can always cancel one policy while keeping the other in effect.
13. Reapply when something changes
If you kick the smoking habit, drop some major weight, or recover from a significant health issue, you may qualify for a lower rate. It never hurts to reapply for life insurance if your health improves. Even if the insurer finds something new, they can't take away your original policy. It's a win-win situation worth exploring.
With these clever tricks up your sleeve, you'll be well-equipped to make the most of your life insurance dollars. Make sure to clear up any doubts or questions you have before committing to a policy.
Insider Tips:
- Comparing Rates: Different insurers calculate risk differently, leading to different prices for similar policies. Gather quotes from multiple companies, ensuring you compare policies with the same coverage amounts and term lengths.
- Applying to Multiple Companies: Submit applications to several reputable companies to find the most affordable option suitable for your needs.
- Purchasing Term Life Insurance: Term life insurance is generally cheaper than permanent life insurance, offering coverage for a specific term. Choose a term aligned with your financial goals and responsibilities.
- Getting in Shape: Being healthier reduces your risk, leading to lower premiums. Maintain a healthy weight, exercise regularly, and manage your health conditions.
- Paying Annually: Annual payments usually result in lower premiums compared to monthly payments. Opt for annual payments when purchasing or renewing a policy.
- Prepaying the Policy: Check if your policy offers a prepayment option. If so, consider it if it fits your financial situation.
- Avoiding Return-of-Premium Life Insurance: These policies are often more expensive since they refund premiums if the death benefit is not paid out. Choose standard term life insurance unless you require the ROP feature.
- Quitting Smoking: Smokers are considered higher risks, and quitting can significantly lower your premiums. Stop smoking and wait a year to qualify for non-smoker rates.
- Converting Current Policies: Converting an existing policy to a more affordable option can save money. Review your current policy and consider converting it to a term life policy if feasible.
- Purchasing While Young: Younger individuals usually receive lower premiums due to being considered lower risks. Buy life insurance as soon as possible to secure the lowest rates.
- Asking for Reconsideration: If your health improves or you find a better offer, you can request a reconsideration of your premium rate. Contact your insurer if this applies to you.
- Laddering Coverage: Purchasing multiple policies with different term lengths ensures coverage for specific financial obligations. Buy policies that cover different periods aligned with your financial responsibilities.
- Reapplying If Anything Changes: Changes in your health, lifestyle, or occupation may result in lower premiums if you reapply. Reapply when significant changes occur.
- When contemplating life insurance, consider personal-finance strategies to save money, such as applying to at least two insurers and shopping around for multiple quotes.
- To manage your personal-finance, aim to make annual payments for your life insurance premiums instead of monthly installments, which can result in savings of 3% to 7%.
