5 Best Ways to Save on Life Insurance
July 4, 2023
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Life insurance is a type of financial product which provides a cash payment or settlement in the event that the insured passes away during the policy term. The intention of life insurance is to reduce the financial hardship that could arise from the insured’s death and lack of income, as well as to protect their surviving loved ones from any obligations or outstanding debts.
There’s a few “life events” which might bring about the necessity of purchasing life insurance. Here are a few samples of when it might be wise to purchase life insurance.
- Getting married
- Having kids
- Buying a home
- Getting divorced
Life insurance, like any insurance product, comes at a price. In exchange for coverage, policyholders must pay a premium each month. Now, given its nature, life insurance is actually pretty cost-friendly – especially when compared to policies like auto insurance, which can run higher than $2,000/year for some individuals. But life insurance, for most standard individuals, is relatively affordable.
The longer you wait to buy it, the more expensive it’ll get. Here’s 5 of the best ways to save money on your life insurance.
Tip 1: Buy life insurance younger.
First and foremost, buy life insurance at a younger age. Failing to do so can be costly the longer you wait. The average cost of a 20-year life insurance policy that has a $250,000 payout is in-and-around $200/year for a healthy 30-year-old man. Compare the same policy for a 40-year-old man. Now, that premium is nearly $500 a year. You can save around $3,000 over the life of your policy, simply by opting to purchase it 10 years earlier.
You might be thinking, “but wait! What if I don’t need life insurance when I’m younger?” – Well, that’s important to note as well. What event constitutes as “needing” insurance? What if you’re young, single, with no debts and no beneficiaries – is it still OK to purchase life insurance just to lock in a lower rate?
It depends. It might be OK to wait, but if you have future plans of purchasing a home, starting a family, or getting married, it’s not a bad idea to make your life insurance more affordable in the long-run and avoid the risk of medical conditions arising in the meantime (which can make it difficult, if not impossible to get insured in many cases!)
Tip 2: Quit (or never start) smoking.
Smoking is bad for your life insurance rates and your home insurance rates. For the former, people who smoke have been proven to have be 15-30x more likely to develop cancer, or to die from lung cancer than those who do not smoke.
The human body is remarkable and the average healthy adult’s lungs will revert back to normal function between 1-12 months after quitting. The cilia in the lungs that were damaged by smoking will begin to clean the lungs easier, handle mucus better, and reduce the risk of infection. Life insurance companies may flag you as a “smoker” for up to 3 years after you’ve quit, after what point you’ll be priced as any normal non-smoker would be.
For home insurance, smokers are more likely to start residential fires on accident, and can therefore be a liability risk.
Tip 3: Purchase a term policy.
Term policies are cheaper than most permanent policies and are a great idea for those of us who don’t believe they’ll have any need for a life insurance policy after a certain period of years – i.e., 10, 20, or 30. Most term policies are purchased as a means to protect a family’s finances in the event the insured passes while the children are still young and attending school (and therefore financially dependent) or until a mortgage can be paid off.
It is, however, advised not to “start small” and then enhance later. If you buy a 10-year term policy, then you realize you still need it after 10 years, your rates will increase upon buying it the second time – as you’ll be 10 years older. Take a good long look at your financial situation, the needs of your loved ones, and look at your future from the perspective of, “could my loved ones feasibly live without my support if I were to pass within x amount of years?”
A life insurance advisor can also give you some insights on what your best option is. Sometimes, permanent life insurance is a good idea for people who will have lifelong dependents or an estate that needs protecting.
Tip 4: Pay annually.
Paying yearly rather than monthly is a good way to save, since it cuts out the administrative fees charged with each monthly payment and many insurers will reward you with a sizeable discount for doing so. In addition, many individuals find it just far more convenient to have a single, one-time payment over having to pay for their life insurance twelve times a year.
Tip 5: Purchase “group” life insurance.
With a lot of insurance policies, you can save by insuring multiple of the same item through the same provider or, if the provider offers other insurance products, insuring other assets through them. This is called “bundling” and it’s an effect way to reap the rewards from most insurers who offer incentives for your return business.
The same is true of life insurance. You can buy policies for multiple people at one time (such as you and a spouse or you and your children) and possibly be discounted on your insurance.
Bonus: work with an Excalibur Defender.
Although this isn’t one of our tips, it’s a great way to save money! Excalibur’s Defenders work to champion the people and help them get the coverage they deserve.
What’s more, we’ll help you get a great price! We have all the best tips on saving money on your insurance products and can’t wait to help you get your best possible price.