| Life insurance,
specifically Term Life, is arguably one of the best values in the entire
financial services arena. Where else can you go and get hundreds of
thousands of dollars in protection for literally pennies per day? 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
Your “half” birthday could be costly. While some
companies raise their prices based on your actual age, most companies
increase 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.
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 into lower rates for the “Super Preferred” customer
than someone with higher risk factors such as a 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.
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. People who are trying to quit smoking, for example,
might be best suited purchasing a shorter term (and then replacing it with a
longer term policy when they qualify for non-tobacco prices). Lastly,
individuals who have 30-year mortgages might want to consider a 30-year term
to ensure that the house is protected throughout the period of the loan.
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.
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
“indemnify” (replace financial loss), and what most people should be looking
for is income replacement for their beneficiaries. Independent financial
planners recommend the following rule of thumb: purchase an amount of
coverage equal to 6-10 times your annual gross income.
The right hobby with the wrong company could cost you.
People who participate in high-risk sports or activities (such as
hang-gliding, skydiving, mountain climbing, scuba diving, 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 type 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.
Check out your payment/billing options. Many life
insurance companies offer discounts to consumers who pay their premiums
annually, or who pay monthly by electronic funds transfer (EFT).
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 coverages won’t overlap or lapse.
Don’t overspend on protection. Term life insurance is
the most affordable and cost-effective pure protection available, and it is
typically much less expensive than a comparable whole life policy. The old
axiom still rings true: “Buy Term and invest the difference.” |
