Life insurance is essential for helping your family continue to meet their goals even if you were to die, ensuring a secure financial backup in the event of misfortune. For many families, life insurance premiums can seem daunting. Is it just another pointless bill?
No – life insurance offers security for you and your family and is crucial for securing the future of your dependants. However, if cost is something that worries you, know that premiums can vary based on your personal circumstances. Your age, your health, the coverage you choose, and the provider you purchase through may all affect the overall price you pay.
There are a number of different strategies you can take to reduce your life insurance costs whilst ensuring that you aren’t cutting any corners on your coverage. Here are a couple of ideas so that you can make the right decision when it comes to your life insurance.
Remember: it depends on YOU.
Life insurance is similar to other forms of personal insurance in that the price you pay will depend on your personal circumstances, but this is especially true when you’re looking to purchase a life policy. Providers will look at “you” above all else when it comes to calculating your rates, so keep that in mind when you are looking to save some money.
Factors that YOU can change may help trim down some costs when it comes to purchasing life insurance, such as the following:
Purchase when you are still young.
Your age when you purchase your policy is the first thing most insurance providers will take into account when calculating your rates. The younger you are, the lower your costs. For instance, a $500,000 policy for a healthy male at 25 may cost $27/month, but will cost the same male at 60 around $260/month. As you can see, there’s a considerable difference between the two.
It might be tempting to push off purchasing life insurance until you think you finally “need it” but that can cost you a great deal later down the line. Buying young can lock in lower premiums for term policies, or even for your lifetime if you are purchasing certain kinds of permanent insurance.
Also, older people tend to be more at risk for developing certain health conditions that can cost you more when it comes to insurance – or they can even make it difficult to qualify for coverage at all.
Calculate your needs and review them when there is a life change.
You will want to consider your family’s needs before you begin the hunt to compare rates. You want coverage that will include your typical bills but consider the cost of your mortgage or post-secondary for your children. Does your spouse work? If so, you may need less coverage as their income can help to supplement the gap you would leave behind.
There are plenty of online calculators you can use to look at your overall numbers. You will also want to do this same process over if there are any significant life changes (a new home, a larger mortgage, another child) or just every few years as needed.
Quit smoking and look after your health.
You may be charged a higher rate if you are a smoker, even if you have quit within the last year. As a rule of thumb, smoking contributes to higher life insurance rates because it can significantly decrease your life expectancy and increase the provider’s chance of having to pay out for a death benefit.
Taking care of your health – including not smoking – can be a significant advantage in ensuring that you are not at any risk for future ailments that could impact your rates or, worse, make it difficult to qualify for coverage altogether. Individuals who exercise regularly, eat a balanced diet, and get enough sleep can significantly decrease their risk of illness or injury.
Pick the right life insurance policy.
One of the best ways to ensuring you keep within a budget is by purchasing the life insurance policy that best fits your situation. If you are a new parent, you might be particularly budget-conscious with your young dependents in mind. Or, if you have older children but want to ensure that your estate planning goes smoothly, a permanent life policy may be more your style. Whatever your circumstances, a broker may be able to advise you what option is best suited for your needs.
Permanent vs term
If you are the sole breadwinner of your family with young dependents and a limited budget, term insurance may be the choice for you because it can cost you significantly less than permanent life insurance and has a locked rate for a specified period. (Keep in mind that premiums may increase after your stated term ends if you need life insurance for longer than you previously stated!)
Permanent life insurance, on the other hand, will never expire so long as you continue to make payments. Permanent insurance is considerably more expensive than term insurance but it adds a benefit while you are still alive called “cash value.” You can borrow from this amount when you want, but you will need to pay it back eventually so you don’t impact the death benefit amount. There are different types of permanent life insurance, including whole life insurance, universal life insurance, variable universal life insurance, and indexed universal life insurance.
A broker may be able to discuss with you what your needs are and break down the individual types for you based on what best fits your situation.
If you are currently working, you may have life insurance through your employer. This can be far cheaper than purchasing insurance on your own because the company you work through will offer you a discount. Of course, term insurance may still be more inexpensive if you are still quite young and in good health – or if you are a new parent on the fence about purchasing insurance. Oftentimes, group insurance may not even be enough to include all your needs. Also, group insurance doesn’t go with you from job to job, so if you leave for whatever reason or change companies, you will be without coverage.
A broker can help you save.
A broker is one of your best resources when it comes to purchasing life insurance. They can help make sure you are getting the coverage you need while ensuring that the policy you purchase also fits within your budget. If you are particularly budget-conscious, they can be a tremendous asset. Here are a few ways how a broker can help you save on your life insurance:
They help you shop around.
A broker helps you compare quotes to see what best matches your needs for the right price. They may have access to opportunities not available on the general market and can find you competitive quotes so that you have plenty of choices.
You can bundle as a return customer.
A broker may recommend ways to cut some costs by purchasing life insurance and another form of insurance through a single provider, such as auto insurance, home insurance, etc. You may become eligible for a discount as a return customer.
You’ll be made aware of any discounts you qualify for.
A broker can discuss with you any discounts you may qualify for, such as preferred health (with a variety of factors, like exercise, build, healthy eating, etc.), husband and wife, quit smoking, and more. You may not even have known you were eligible!
The cost of life insurance shouldn’t overwhelm you when it’s such an essential buy. A broker can help walk you through the process and offer ways to save so that you never feel the need to cut any corners.