Everybody wants to save as much as they can when they make a purchase. Life insurance is no different, and we completely understand that. Unfortunately, people tend to sacrifice proper coverage for convenience. We have all been guilty of it at some point or another: we rush into a purchase without getting all the facts because we want to “get it over with.” Life insurance is not one of those purchases that should be done on impulse. Yes, it may be convenient, but at claim time, you or your family will wish you had shopped the market and got that extra $100,000–$200,000 in coverage for the same price. Rather than taking a guess on whether you are getting the most bang for your buck, here are some ways to save on your life insurance purchase.
1. Combine Coverage
Most insurers offer a discount to multi-life policies. When a couple combines their coverages into one multi-life policy, the insurer usually discounts one policy fee. These savings could range anywhere from $40–$80 per year. There is really not much difference between having one multi-life policy or two individual policies, other than the savings. Please do not confuse this with Joint First-to-Die policies. While there are savings in Joint First-to-Die policies, this coverage is quite different from a multi-life policy. Please refer to Jack Larmond’s previous article, “Joint First-to-Die Life Insurance—Is it Right for You?” for a better understanding of how this coverage works.
2. Work with a Life Insurance Broker
A broker has the ability to shop the insurance market for the best rates. A good broker will do a complete market analysis and show you the best rates, as well as tell you the different features that each company offers. Sometimes the lowest price doesn’t necessarily mean you are getting the best coverage, but a good broker should be able to tell you the different features each company offers and let you decide if it is worth the extra premium. Many of these features are automatically included with some insurance companies and not with others, so it is important to work with a qualified broker. Unlike many other purchases in life, the pricing is non-negotiable from the insurance company, although a broker can shop around to find you the best prices.
3. Purchase a Fully Underwritten Product
There are companies in the industry that advertise “No-Medical” life insurance. These are convenient, but are usually much more expensive. This is because the insurance company is taking on more of a risk by not viewing your medical history. These are great products for people that have had health issues in the past, but if you have had no previous health concerns, then these are probably not the best option for you. For more information, please refer to my article “Reasons to Take a Life Insurance Medical Exam.”
4. Take Your Medical Exam Seriously
Many insurance companies require you to provide a blood and urine sample during your medical exam. It is important that you do all the right things to ensure those blood and urine samples come back normal. Life insurance companies tend to charge a higher premium, or could decline your application, if your blood and urine tests come back abnormal. For more information, please see my article “How to Prepare for a Life Insurance Medical Exam.”
5. Purchase Term Insurance
Term insurance is more affordable than permanent insurance. There are definitely instances where permanent insurance is the solution (i.e. estate planning, funeral expenses, etc.). But for the majority of the population, the bulk of their insurance portfolio should be term insurance. If you have extra room in your budget, then you may elect to purchase some extra permanent insurance. But it is important to ensure that you have put the proper coverage in place first, before you go out and purchase permanent coverage. In other words, don’t sacrifice the right amount of coverage to have a longer duration of coverage. For example, in today’s marketplace, for a 40-year-old male, the cost of a $500,000 term 20 policy is $53 per month. By comparison, the cost of a $100,000 permanent policy is $80 per month. Before the client even considers the $100,000 permanent policy, he should have set the $500,000 term policy in place first to make sure his immediate needs are covered (i.e. debt, lost income, etc.). For more information, see my article “Term Insurance vs. Permanent Insurance.”
6. Pay Your Premiums Annually
When you pay your premiums annually, insurance carriers give you a discount on your premium. The discount usually works out to be about one month’s premium. Obviously, it isn’t easy for everyone to pay a large lump sum up front. But if you can afford to do so, paying annually can save you money. It is important to remember that you don’t want to miss your payment, so many elect for monthly payments to ensure that their policy never lapses if they missed their annual billing notice or did not pay on time.
If you keep these tips in mind the next time you look for life insurance coverage, you will be sure to save yourself some premium dollars.
Article Written by: Mike Castagna