According to recent data, about 52% of American adults own life insurance through either individual or group benefit plans. And while the average per-month premium for these plans is just over $40, the long term nature of life insurance means that policyholders typically pay these premiums for decades. Here are ten tips and tricks to help save on life insurance for those looking to cut costs where they can.
Table of Contents
- 1. Purchase Life Insurance ASAP
- 2. Consider Term Life Insurance
- 3. Improve Your Health
- 4. Balance Costs and Benefits
- 5. Regularly Reassess Your Policy
- 6. Opt for Annuity Payments Over Lump Sum Options
- 7. Ask About Discounts
- 8. Get a Medical Assessment
- 9. Do Your Research
- 10. Find an Independent Agent
- Putting It All Together
1. Purchase Life Insurance ASAP
The earlier you can purchase life insurance, the better. This is because probable mortality rates steadily increase over time. In other words, the older you are, the higher risk you represent to insurers.
For example, at age 20, the average probability of dying within one year is 0.14%. By age 30, this number is 0.22%, and by age 50, the probability reaches 0.59%. Since life insurance premiums are set at the start of whole or term life policies, the sooner you buy insurance, the lower your monthly payments.
2. Consider Term Life Insurance
Another way to save money on life insurance is to purchase a term life policy. Unlike their whole life counterparts, term policies cover a set period, such as 10, 20, or 30 years, and have lower premiums than whole life policies. In practice, this means you could purchase a 30-year term life policy at age 40 and pay less over time than with whole life insurance.
3. Improve Your Health
The better your health, the lower your insurance premium. It makes sense: If you are in poor health, you represent a higher risk to insurance companies. Common health factors considered include your weight, cholesterol levels, blood pressure, and any habits that put your health at risk, such as smoking.
4. Balance Costs and Benefits
There is no standard death benefit amount. Insurers may offer $250,000, $500,000, and even $1 million life insurance payouts, along with rider options such as accelerated death benefits or guaranteed insurability. For example, a guaranteed insurability rider allows you to purchase additional coverage in a specific period without a new medical examination.
Each of these riders, however, comes with an increase in premium costs. As a result, it’s worth considering both costs and benefits to find a balance that works for you over the long term.
5. Regularly Reassess Your Policy
Life circumstances and health concerns change over time, and so should your life insurance policy. Dig out your policy documents every two to three years and reassess what you have, what you need, and how much you pay. For example, if you have significantly improved your health in the last year, you may want to consider reducing your coverage. You may want to increase your coverage amounts if you have added a new child to your family or changed jobs.
6. Opt for Annuity Payments Over Lump Sum Options
Lump sum payments are a common option for life insurance. This means that benefits are paid out in a single, large settlement that your beneficiaries can use as they see fit.
Annuity payments are another option available to beneficiaries. In this case, fixed payments are made over a set period of time. Since this allows insurance companies to avoid large, upfront settlements in favor of smaller payouts, the premium cost for annuity payments is often lower.
7. Ask About Discounts
Depending on your insurance provider, you may be able to access discounts. Policy bundling is one common discount. If you choose to bundle your life, home, and auto insurance with the same provider, you may get a discount on all three. Discounts may also be available if you belong to an organization, such as the military, or a defined group, such as teachers or seniors.
In addition, you may be able to save money on your life insurance premium by paying the annual premium amount up-front rather than month-to-month.
8. Get a Medical Assessment
Insurance providers use medical assessments to help determine how much you pay for life insurance. For example, if an assessment reveals a chronic or acute condition, your monthly premium may increase, or you may be denied coverage.
As a result, most people prefer to avoid medical assessments where possible. Insurance companies may offer a no-assessment option, which uses average mortality rates based on age to calculate your premium. Since these no-assessment options also include individuals with health problems, however, rates are increased to offset possible risks to the insurer.
This means that if you are in good health, it may be worth opting for a policy with a medical assessment. By giving your insurer access to accurate and timely medical data, you may be able to reduce your premium and save money over time.
9. Do Your Research
While the basics of term and whole life insurance policies remain consistent, there is considerable variation in how much coverage insurers offer, how much they charge each month, and what type of discounts they offer. This means it’s a good idea to research before deciding on a life insurance plan.
Start with your current home or auto insurance company. Check to see if they offer life insurance and any discounts for bundling with your existing policies. Next, evaluate some of their competitors and see what they offer, such as no-assessment policies or discounts for payments in full. It’s also worth asking if they offer a discount for switching any or all of your insurance from your current provider.
10. Find an Independent Agent
Agents working directly for life insurance providers have a vested interest in selling you their company’s products. However, given the number of life insurance options available, agents can help demystify the insurance market and present multiple policy options.
To help find a policy that meets your needs but isn’t tied to a single insurer, look for an independent agent. These agents aren’t tied to a specific insurance company. Instead, they work on your behalf to find a policy that meets your benefit and budget needs.
Putting It All Together
Overall, the cost of life insurance depends on your personal circumstances, your health, and your family’s needs. Therefore, considering the fluid nature of those conditions, regularly refreshing your knowledge of the terms of your policy, in addition to your personal needs, you may be able to save money on your life insurance. If you need further clarification about the best way to move forward, make sure to speak with a trusted agent or financial adviser.