Saving money – it’s hardwired into a 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 are usually just a Google search away.
However, when it comes to life insurance, you can’t only focus on price. Not when there is the matter of your family’s financial future at stake.
So, with that in mind, we’ve put together the following tips to help you spare 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 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 for $21 a month, which is less than you’d probably spend on two movie tickets. If that man were ten years older, he would pay almost $50 a month for the same 20-year coverage.
Health also matters because the healthiest people get the lowest rates. 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 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 to finalize fully medically underwritten term life insurance coverage — issued by leading life insurance MassMutual — without a medical exam. Eligibility is determined based on answers in your application.
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.
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 coverage. 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.
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 death benefit, which is a payout equal to the policy’s coverage amount, income tax-free. 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, the renewed policy will cost more than the policy you can get now. (You can get a free term life insurance quote here.)
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 costs significantly more than a term policy – generally 5 to 10 times as much per month. Because of the complexity of whole life policies, buyers should work with a financial professional to purchase and maintain their policy.
Two other common policy types you should be aware of are simplified issue and accidental death coverage. Both of 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.
Simplified-issue policies are a type of term life insurance coverage that is limited in face amount and term lengths and provides you with less coverage for your money. These policies are geared more towards those who are not as healthy 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 insurer must charge more to make up for the additional risk they are taking on.
The increase in price 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 healthy 35-year-old man would cost about $20 per month with a simplified-issue provider. For $21 per month, that same healthy man could buy double the coverage – a 20-year, $500,000 medically underwritten Haven Term policy.
Like simplified-issue life insurance, accidental death coverage can leave you with less value for your dollar. It does exactly what the name entails – covers you for an accidental death like a car accident, bike accident, fire or other freak accidents, which is why they are often considered in addition to life insurance by people who work under hazardous conditions. However, there are numerous exclusions in an accidental death policy, such as physical and mental illnesses that impact millions of Americans like cancer, heart disease, diabetes, overdoses, and suicide. With a policy that could potentially cover you for 30 years, 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 20-year, $500,000 accidental death policy for a healthy 28-year-old woman is quoted at $39. For that same woman, same policy amount and same coverage duration, she could purchase a medically underwritten term life insurance policy for $17.25 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 number of policies available can be overwhelming (we empathize, and wish we could change this), for many, a 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 you want 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 unless you 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? Start with this general rule: 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. Don’t forget to factor in specific financial and lifestyle needs your family has, such as your mortgage, debts and your children’s educational needs as they get older. 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 and a 30-year mortgage, 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.
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 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 is diagnosed with a terminal illness, 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.
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 may add to 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 will 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 quotes. Compare everything from rates to company ratings 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. Our customer support team is (very) friendly and happy to help.