10 Tips to Save on Life Insurance

Photo (cc) by dandeluca

Editor’s Note: This post comes from partner site Insure.com.

Just as there are different life insurance plans to meet your needs, there are different ways to save money on life insurance.

Most importantly, shop around for life insurance quotes. There are hundreds of insurance companies offering a wide variety of plans and prices. Comparison shopping can save you big bucks. In addition, here are 10 more ways you can save money on your next life insurance purchase.

1. Consider term insurance

Some financial planners advocate permanent life insurance policies with cash value components because the policies force you to save money. Others recommend you buy term life insurance for the cheaper premium and invest the difference.

But cash value in life insurance should not be considered a traditional investment. Any withdrawals or loans not repaid will reduce your death benefit. Also, if you take a partial withdrawal from the cash value of your policy in an amount greater than your total premiums, the withdrawal in excess of your total premiums is considered taxable income.

Furthermore, the difference in premiums between term vs. permanent life insurance is not just a matter of a few dollars per year. According to the Society of Actuaries, premiums for whole life can be five to 10 times higher than the same amount of level term life, depending on the kind of level term being compared. For example, if you’re comparing the premiums of 30-year level term it will be a smaller multiple, while premiums on a 10-year term policy could be a larger multiple.

Every time you renew term life insurance, your premiums will increase. Renewing a short term life insurance policy over and over isn’t a wise use of money. Instead, buy a long term life insurance policy, or buy whole life insurance if you definitely want to leave money to your heirs.

People with a short-term need generally include those who want life insurance to cover a specific debt — like paying off a mortgage.

2. Seek out low-load policies

“No-load” or “low-load” life insurance policies have fewer expenses built into them, such as agent commissions and fees, than other life insurance policies. This can mean low cost life insurance. For variable life insurance, these lower expenses mean a higher percentage of your premium goes to work for you right away, allowing you to build your cash value faster.

Not many companies sell no-load or low-load policies. No-load policies can be purchased mainly through financial advisors who charge flat fees rather than collecting commissions from insurance companies. Those that sell no-load policies include Ameritas Advisor Services and TIAA-CREF. Also, these policies may not be available in all states.

3. Don’t buy a guaranteed issue policy if you’re healthy

“Guaranteed issue” life insurance policies require no medical exam but may ask a few basic medical questions. Guaranteed issue policies are riskier for the insurer and are, therefore, more expensive than fully underwritten insurance policies.

Guaranteed policies are generally purchased by people who have difficulty obtaining life insurance due to medical problems. If you have some medical problems you’re still likely to get better life insurance rates by opting for an underwritten policy, for which you take a medical exam.

The high premiums, combined with a low face amount for the death benefit, can make guaranteed issue life insurance a less desirable option. With some of these policies, you could end up paying more in premiums after only a few years than your beneficiaries might ever receive from the death benefit.

4. Shop online first

While not all online life insurance quoting services will give you the rock-bottom price for term life insurance, they can still be a useful source of information about prices. Just remember, the more personal information you give, the more accurate your life insurance quotes will be. Your “lowest quote” should be used as a baseline for shopping around.

5. Improve your health

Health problems make it hard to buy life insurance. High blood pressure, diabetes and heart disease are among those conditions that can make life insurance companies pump up your rate.

Then there are rates for smokers and other nicotine users. There’s no escaping a high life insurance price, but shopping around is wise. Some insurance companies will consider you a “nonsmoker” only if you’ve never smoked. Others require you to be “nicotine-free” anywhere from six months to five years to obtain a non-nicotine rate.

If you smoke marijuana, pipes or cigars, but not cigarettes, you still should admit to being a smoker on the policy application.

Insurance companies may request urine or saliva tests to check for the presence of nicotine. If you chew tobacco, you might end up paying smoker rates for your life insurance policy.

Another major health factor is weight. If you’re healthy but somewhat overweight, you will likely be quoted higher rates too.

If you have a pre-existing medical condition that could lead to higher rates, you’ll make your underwriters happier and probably get yourself lower life insurance premiums by showing your insurer a history of improving your health, taking your medications regularly and acting responsibly about your health.

6. Buy only what you need

Nailing down a formula for how much life insurance is an imprecise science. You should ask yourself how much money it will take to maintain your family’s lifestyle if you were to die. Do you have money earmarked for your children’s education? For methods to calculate a life insurance amount, read How much life insurance do you need?

Experts advise that you do an analysis annually or at least once every three years. Also, you should always reexamine your policy whenever you have a major life change. For example, if you have a new baby, you have to recalculate college education needs and child-care costs. If you own a home, a mortgage is likely your biggest financial burden. Because your mortgage balance decreases with each payment, it’s important to include those revised figures in your calculations.

7. If you need more life insurance, consider a rider as opposed to a new policy

Just because your needs change doesn’t mean you should run out and buy a new life insurance policy. In many cases, a rider adding extra coverage to an in-force whole life insurance policy can let you expand your coverage without sacrificing your built-up cash value. Ask your agent if there’s a charge for adding a rider.

8. Buy as soon as the need exists

An advantage to buying life insurance as soon as possible is that your premiums are lower. As you age, life insurance gets more expensive. Many term policies give you the option to renew your coverage at the end of the term without undergoing another medical exam. You also can lock in premiums by asking for a “level premium” policy, which means for a specific time period, say 20 years, your premium rate stays the same. After that term expires, your rates will increase. But if you don’t have any dependents, your money may be better spent elsewhere.

9. Pay your insurance bill annually

Once you’ve found the best insurance policy for your needs, find out if you can save money by paying annually. Some insurers charge fees for monthly billing.

In general, the fewer payments you make over the course of the year (known as fractional premiums), the less you’ll pay overall. Also, some insurers charge less if they can transfer the premium payments directly from your checking account.

10. Ask for a reevaluation if your health improves

It’s possible to save money even after you’ve bought life insurance. Just because you’ve been put in a relatively expensive rate class doesn’t mean you’re out of luck forever.

If you’re paying higher premiums because of a specific health condition, ask your insurance company if you can apply for a rate reconsideration if your health has improved and you’ve sustained better health for at least a year.

If you’ve established a history of lowering your blood pressure, cholesterol, or any other controllable rate-increasing factors, many insurance companies will reevaluate your premiums if asked.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
This Type of Social Security Benefit Is Often Overlooked
This Type of Social Security Benefit Is Often Overlooked

The Social Security Administration is not helping certain people get money to which they are entitled, a report says.

8 Ways to Slash the Cost of Homeowners Insurance
8 Ways to Slash the Cost of Homeowners Insurance

Reviewing this critical insurance policy takes a little effort, but it pays off big.

9 Everyday Problems You Can Solve With Vaseline
9 Everyday Problems You Can Solve With Vaseline

Forget expensive specialty products. Good ol’ petroleum jelly can address many common annoyances.

Why Cutting the Cord Can Be Confusing — and How to Decide If It’s for You
Why Cutting the Cord Can Be Confusing — and How to Decide If It’s for You

Streaming TV might sound like the antidote to sky-high cable bills, but cutting the cord is easier said than done.

These 12 Reusable Products Save You Money Over and Over
These 12 Reusable Products Save You Money Over and Over

Buy reusable versions of these household items, and you won’t have to spend another dime on them for years.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

Am I Eligible for My Mother’s Social Security Benefit?
Am I Eligible for My Mother’s Social Security Benefit?

Can an adult daughter tap into her late mother’s benefit?

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

This Surprise Factor Can Raise Your Risk of Dementia
This Surprise Factor Can Raise Your Risk of Dementia

Nearly half of U.S. residents may face this threat.

Organize Your Home With These 10 Thrift Store Finds
Organize Your Home With These 10 Thrift Store Finds

Resolve to be clutter-free in 2021 with these secondhand purchases.

This Gas Station Scam Is Victimizing More Drivers
This Gas Station Scam Is Victimizing More Drivers

For the second straight year, a growing number of Americans believe they’ve fallen prey to this scam.

11 Laws You Could Be Breaking Without Knowing It
11 Laws You Could Be Breaking Without Knowing It

Seriously? Fibbing about the weather is a crime? This and other little-known legal traps await the unwary.

11 Generic Products You Should Buy at Costco
11 Generic Products You Should Buy at Costco

Not all generics are worthwhile, but these are among the best from Costco’s Kirkland Signature brand.

These Are the 3 Best Used Cars You Can Buy
These Are the 3 Best Used Cars You Can Buy

These vehicles boast reliability, safety and long-lasting value.

13 Things Seniors Can Get for Free — or Almost Free
13 Things Seniors Can Get for Free — or Almost Free

There are many ways to get cheap or free services and goods after reaching a certain age.

6 Legal Documents Retirees Need — but Don’t Have
6 Legal Documents Retirees Need — but Don’t Have

Few retirees have all of these documents that are crucial to their golden years — especially during a pandemic.

8 Tips for Retiring Comfortably on Social Security Alone
8 Tips for Retiring Comfortably on Social Security Alone

It’s never too early to start learning how to live well while living on less.

Internet Providers Can’t Charge You for This Anymore
Internet Providers Can’t Charge You for This Anymore

Starting this month, your ISP no longer can bill you for this fee.

Is This Treatable Condition Causing Your High Blood Pressure?
Is This Treatable Condition Causing Your High Blood Pressure?

Researchers say too many doctors are overlooking this potential source of hypertension.

15 Painless Ways You Can Cut Costs in 2021
15 Painless Ways You Can Cut Costs in 2021

Follow these tips to save, so you’ll have money for things that really matter.

9 Small Expenses That Are Bleeding Your Budget Dry
9 Small Expenses That Are Bleeding Your Budget Dry

Keep more of future paychecks by eliminating these budget-busting unnecessary expenses.

11 Huge Retirement Costs That Are Often Overlooked
11 Huge Retirement Costs That Are Often Overlooked

Does your retirement budget account for all of these costs?

7 Bank Accounts With Extra Perks for Seniors
7 Bank Accounts With Extra Perks for Seniors

These accounts offer exclusive discounts and other perks — including interest — to older customers.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.