4 tips for securing affordable term life insurance

Saving money – it’s hardwired into a smart shopper’s economic DNA. Whether you’re buying a new car, new shoes, or just more toothpaste, finding a great deal is one of life’s little victories.

Life insurance is no different. Every shopper seeks the most affordable premium rates for the best value. And, thanks to the power and transparency of the Internet, price comparisons and numerous life insurance rate quotes are usually just a Google search away.

Unlike toothpaste or shoes, when it comes to life insurance, you can’t only focus on price. Not when your family’s financial future could be at stake. Taking the time to learn about life insurance providers, as well as the various types of life insurance policies that are available, can be the key to getting great coverage for as little as possible.

So, with that in mind, we’ve put together the following tips to help you find cheap term life insurance that spares your wallet while still addressing your coverage needs.

Tip #1: Start while you’re still young and healthy

Being proactive is never a bad thing. Doubly so for life insurance. That’s because the lowest life insurance rates go to the youngest and the healthiest applicants. As you age, the rates you qualify for will gradually increase.

For example, a 35-year-old man in excellent health can get a 20-year, $500,000 Haven Term policy issued by MassMutual for $23.34 a month, which is less than you’d probably spend on two movie tickets. If that man were ten years older, he would pay $56.07 a month for the same 20-year coverage. Life insurance for seniors not only costs a lot more, some insurers don’t even offer it beyond a certain age.

Health also matters because the healthiest people get the lowest rates. Insurance providers offer the lowest life insurance rates to those they determine offer the lowest risk of premature death. And the safest customers are healthy. Just like with your age, it’s your current health right now that determines your rate for the duration of the policy.

Traditionally, you’d need a medical exam as part of the underwriting process to determine your health class. However, certain advancements in the industry have started to change that. Take the InstantTerm process, for example. This innovation allows qualified Haven Term applicants between the ages of 18-45 (and for policies up to $1 million) to finalize term life insurance coverage — issued by life insurer MassMutual — without a medical exam. (Keep in mind that: Issuance of the policy or payment of benefits may depend upon the answers given in the application and the truthfulness thereof.)

Even if you do need a medical exam to finalize coverage, you should lock in your rate as soon as possible so your age and health status can save you money on premiums for the next 10, 15, 20 or even 30 years.

Do the work to be as healthy as possible

While you don’t want to wait to secure life insurance, you can do the work to lose weight, improve your cholesterol, or quit smoking and lower your premiums. Some life insurance companies allow you to take another health exam after one to three years to adjust your premiums. If not, you can always apply with a different company to reduce your monthly premium cost.

Tip #2: Make sure you’re buying the right kind of policy for you

Age and health aren’t the only things that matter when you’re looking for affordable life insurance policy. The type of life insurance policy you choose can have a significant impact on not only your premium costs but also how much coverage you get for that money. Let’s take a look at term life vs whole life.

Term life insurance

We will start with term life insurance. As the name alludes to, term life insurance coverage lasts for a predetermined amount of time that you select – usually 10, 15, 20 or 30 years. It’s one of the simplest and most affordable types of life insurance.

If you were to die during the term length, your beneficiary would receive a cash death benefit, which is a payout equal to the policy’s coverage amount, income tax-free.

Medically underwritten policies take into account your current health and allow the insurer to make an informed decision on your risk profile, which generally means lower premiums if you are reasonably healthy. While this may mean having a short medical exam, the long-term cost savings are often worth the small inconvenience.

Once the term length is up, coverage ends. At this time, you can choose to renew it, but since your rates will be based on your age and health at that time, they will be higher. (You can get free term life insurance quotes here.)

Simplified-issue policies – More expensive term life insurance

Simplified-issue policies are often marketed as “no medical exam” life insurance policies. They are a type of term life insurance that is limited in face amount and term lengths and ultimately provides you with less coverage for higher premiums.

Since these policies are a form of term life insurance, many people looking to secure coverage without taking the time to complete a medical exam believe it is the affordable, quality coverage offered by medically underwritten term life insurance. If you don’t know what to look for, you don’t know that in exchange for answering fewer questions about your health, you’re probably paying more for less coverage.

These policies are geared more towards those who are not as healthy or have pre-existing conditions and may be unable to get traditional life insurance policy. Where the Haven Term policy is available in coverage amounts up to 30 years and $2 million, many simplified issue policies will only provide coverage up to 20 years and $250,000. Some will go up to $500,000. Since the policy isn’t medically underwritten, the application process is easier but the insurer must charge more to make up for the additional risk they are taking on.

The more expensive life insurance rates and lower coverage options are a result of the insurer not personalizing pricing to you, the applicant. These policies are issued by answering fewer health questions and don’t require a medical exam. To understand the price difference, a 20-year, $250,000 simplified issue policy for a 35-year-old man in excellent health would cost about $28 per month with a simplified-issue provider. The same 35-year-old man could buy more coverage – a 20-year, $500,000 medically underwritten Haven Term policy – for less than $24 per month.

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Permanent life insurance

Next, there’s permanent life insurance. Permanent life insurance – which includes whole life – is a type of policy where coverage lasts for a lifetime (assuming you continue to pay the premiums), and it offers a cash value component that can grow over time. Because of the lifetime coverage and the cash value feature, a whole life policy is much more expensive than a term policy – generally 5 to 10 times as much per month. Because of the complexity of a permanent policy, buyers should work with a financial professional to purchase and maintain their policy.

Accidental death coverage

Another common policy type you should be aware of is accidental death coverage. These policies can usually be purchased online but can leave you (and ultimately your family) paying too much or with inadequate coverage. While some coverage is better than nothing, any life insurance buyer wants to feel confident that the policy they buy is suitable for their needs and priced appropriately.

Like simplified-issue life insurance, accidental death coverage can leave you with less value for your dollar. This kind of policy does exactly what the name implies – covers you for an accidental death, such as death resulting from a car accident, a bike accident, a fire or another kind of freak accident – which is why it is often considered in addition to life insurance by people who work under hazardous conditions. However, accidental death policies include numerous exclusions, such as physical and mental illnesses, that impact millions of Americans. Typical policies exclude things like cancer, heart disease, diabetes, overdoses, and suicide. When you shop for a policy that could potentially cover you for 30 years, it’s a good idea to consider the possibility that your health status could change over time. That’s something to consider, especially when it comes to protecting your family financially.

Let’s consider pricing. A 30-year, $500,000 accidental death policy for a healthy 30-year-old woman is quoted at $30, according to insurance broker Fabric’s quote tool. Limitations would be that if, during that 25-year timeframe, she passed away from an illness or health issue of any kind, the death benefit would not be paid out to her beneficiaries.

For that same woman, same policy amount and same coverage duration, she could purchase a Haven Term policy issued by MassMutual for $30.23 per month. While the accidental death policy would only cover an accidental death or injury, the term life insurance policy would cover any kind of death that life hopefully doesn’t throw her way.

While the accidental death policy would only cover an accidental death or injury, the term life insurance policy would cover any kind of death that life hopefully doesn’t throw her way.

Choosing the right policy type

While the number of policies available can be overwhelming (we empathize, and wish we could change this), for many, a medically underwritten term life insurance policy will offer the coverage you need at an affordable price.

Tip #3: Select the right coverage amount and term length from the get-go

If you were shopping for a new minivan, you probably wouldn’t drive off the lot in a 2-door hatchback. You also wouldn’t buy a 15-passenger van despite all the extra room you’d have. Why? Because what’s probably most important to you is getting the best deal on what your family actually needs.

Life insurance should work the same way. You shouldn’t pay for $1 million in coverage, also known as the death benefit, unless you actually need that much. You also shouldn’t skimp on coverage that’s meant to be your family’s financial safety net.

So how do you find out the right amount of coverage for you? Life insurance companies offer a range of benefit options so you can choose what is appropriate for your family.

Start with this rule of thumb: Your coverage should replace your income for 5 to 10 years. If you earn $100,000 a year, a $500,000 to $1 million in coverage will get you into that ballpark. (And remember, in most cases, life insurance payouts aren’t subject to estate taxes.)

Don’t forget to factor in specific financial obligations and lifestyle needs your family has, such as funeral expenses, your mortgage, debts, your children’s educational expenses as they get older, or income replacement you may want to provide if your spouse will likely take time off if you passed away. A life insurance calculator can factor in all these financial considerations to provide a proper recommendation.

The policy’s term length should also be considered when securing adequate coverage at the best price. If the kids will be grown and no longer financially dependent 20 years from now, a 20-year policy may be the right amount. If you have a newborn, a 30-year mortgage, and significant student loan debts, then a longer term length might be necessary. You can usually purchase more coverage when a policy expires, but it costs significantly more. That’s why choosing the right term length – not too long and not too short – will save you money over the long-term.

A note for stay-at-home parents

When using the rule of thumb to determine life insurance needs, remember that just because one spouse doesn’t bring in traditional income, it doesn’t mean he or she doesn’t need life insurance.

Stay-at-home parents often need life insurance to cover the costs of the many services they provide for their families. From childcare to home cleaning and management, stay-at-home parents are worth a great deal. In fact, one survey valued stay-at-home moms at more than $160,000 per year in 2019. That value needs to be protected.

When determining the coverage needs for a stay-at-home parent, consider the age of your children, the cost of childcare and future education expenses, and potential income replacement if the breadwinning spouse would like to take time out of the workforce to reduce the number of lifestyle changes for kids who are used to having a parent at home.

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Tip #4: Pay attention to riders

In addition to altering your coverage amount, you can also customize your policy in the form of riders. Riders are add-ons that address specific situations and may be offered as part of the life policy, or for an added fee. For example, an accelerated death benefit rider allows a policyholder to withdraw a portion of the policy’s benefit early if he or she becomes terminally ill, as outlined in the policy provisions. That way, part of the coverage could be used to pay for medical bills or lost wages as a result of that illness.

Another common rider is one that offers a convertibility feature, which provides you with an option to convert your term life insurance policy to a whole life policy within a specific time period, regardless of the insured’s health status. Some people like the flexibility this rider provides, but for those who never choose to actually convert, it adds to their premium amount per month.

Permanent life insurance policies offer an even greater range of riders, or extra benefits, such as disability insurance. These riders can make permanent life insurance, which is already more expensive than term life, even more so.

Riders address many different kinds of hypothetical situations. When you’re shopping for coverage, it can be tempting to add riders “just in case” it’s helpful down the road. But keep in mind, each rider has the potential to increase your monthly payment, and in reality, there are only so many situations that you will encounter. Be sure you’re adding on riders that you actually think you could need or you’d be glad you have down the road if you want to keep coverage as affordable as possible.

Ensuring high quality and affordable protection

Everybody loves a great deal, and thanks to the Internet it’s easier than ever to find one. But remember: information flows both ways online, so it’s also easier than ever for companies to get your attention with a product that might not meet your needs.

It’s up to you to understand the difference. Are you getting a great price on the policy you need? Or have you found a low price on a policy that will either cost you more in the long run or not provide you with ample coverage? If it’s the latter, cheap life insurance can come at an incredibly high price.

So determine your needs. Get life insurance quotes. Compare everything from rates to company ratings (independent assessments of an insurer’s financial strength and claims-paying ability) to actual customer reviews. With a little legwork (and help from your old buddy, the Internet), you can find a policy that is both dependable and affordable.

And, if you’re looking for a place to begin your search, might we suggest here. Check your rate without providing any personal information. When you want more information, our customer support team is (very) friendly and happy to help.

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Chelsea Brennan is the founder of Smart Money Mamas, a personal finance blog that focuses on family finance, investing, and reducing money stress. Chelsea is an ex-hedge fund investor whose work has appeared in a wide array of publications, including Forbes, Business Insider, and more.

Real Rate is based on your application and third party data obtained during underwriting.

Haven Term is a Term Life Insurance Policy (DTC 042017 [OK1] and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. Policy and rider form numbers and features may vary by state and may not be available in all states. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Our Agency license number in California is OK71922 and in Arkansas, 100139527.

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