Money Saving Tips When Buying Life Insurance
Life Insurance Tips to Protect Your Family
Rates for Term Life Insurance remain at all-time lows, and now is the time to lock in the best prices. Here are some ways to help you save money when purchasing life insurance.
Buy when you’re young.
Although your financial needs may be lower at a younger age, the rates are also substantially cheaper when you’re young. Remember, the goal is to cover your primary assets (like your salary and house) so that if something were to happen to you, your beneficiaries would be able to persevere financially. The best advice is to lock in as much protection at a young age while your health and prices are still good.
Select the right length of coverage.
Everyone has different needs, and not one size fits all when it comes to term life insurance. While it may make sense for people in their 30s and 40s to secure a 20-year term length, a 10-year term might be more appropriate for someone nearing retirement.
Individuals who have a 30-year mortgage might want to consider a 30-year term to ensure that the house is protected throughout the period of the loan.
Buy before any major health issues arise.
Healthy people have the best mortality risks and thus are much cheaper for companies to insure. This translates to lower rates for the “Preferred” customer than someone with higher risk factors such as heart condition, cancer or diabetes. Conversely, if you were unhealthy when you acquired your policy, and your health has now improved, it might be time to shop for a new policy, as your rates are likely to be lower.
Buy the right amount of coverage.
Many agents may try to sell you more coverage than you need. The purpose of life insurance is to replace financial loss, and what most people should be looking for is income replacement for their beneficiaries. Financial planners recommend the following rule of thumb: purchase an amount of coverage equal to 6-10 times your annual gross income.
Your “half” birthday could be costly.
While some companies raise their prices based on your actual age, most companies increases the price of their policies six months before your birthday.
It’s a term called “Age Nearest” in the industry, and that half-year price increase could really add up over a 20-year term policy.
Check for price breaks.
Companies often offer “price breaks” at certain coverage amounts (i.e. $250,000 vs. 225,000). The truth is that many people can actually pay less money for more coverage. Check how much or little your prices increase when you increase coverage to $250,000, $500,000 or $1,000,000.
The right hobby with the wrong company could cost you.
People who participate in high-risk sports or activities (such as skydiving, scuba diving, climbing and racing), or even those who like to have an occasional cigar could very well pay more money if they don’t pick the right company. Every company looks at risk factors differently and some are more liberal in certain areas than others. Make sure you work with an insurance company that has properly matched your personal profile with their underwriting criteria.
Work Policies aren’t always the best deal.
Work policies are often based on a composite profile of the employees you work with, many of whom may be less healthy than you, or have other underwriting factors that might drive up rates. These types of policies also expire if/when you leave the company. Inexpensive term life insurance polices that cover your dependents until they can live comfortably on their own are often a better alternative.
Review your policy often.
Do a review of your life insurance policy a minimum of every three years, if not more often. Rates may be lower, and your circumstances may have changed, necessitating more or less protection. If you are replacing a policy, make sure you allow enough time to get your new policy in place so coverage won’t overlap or lapse. Never cancel your old policy until the new one is not issued.
Don’t overspend on protection.
Term life insurance is the most affordable and cost-effective pure protection available, and is typically much less expensive than a comparable whole life policy. The old axiom still rings true: “Buy term and invest the difference.”
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