6 Ways How To Get Cheap Life Insurance
There’s no bad time to buy life
insurance, so if you’re ready to shop, you may be wondering how to get cheap
life insurance.
One of the top reasons that
people don’t own life insurance is because they think it’s too expensive,
according to the 2020 Insurance Barometer Study by LIMRA and Life Happens. Many
people believe this because they don’t have a good grasp of how much life insurance
costs.
If you’re among those who think
this way, you might be surprised how affordable life insurance can be. In fact,
you can get cheap life insurance if you take the right steps when shopping and
applying for a policy.
1. Buy a Term Life Insurance
Policy
You have two main options when it comes to buying life insurance: term life insurance and permanent life insurance. A term policy will provide coverage for a certain period of time, such as 10, 20 or 30 years. Two companies—Banner Life and Protective Life—offer 40-year term life policies.
A permanent policy, on the other hand, will provide lifelong coverage.
“A term
insurance policy is the cheapest way to go,” says Jon Voegele, chair of Life
Happens. More than half of the 2020 Insurance Barometer Study respondents
estimated that a $250,000 term life policy for a healthy 30-year-old woman
would cost $500 or more a year. However, the actual cost is about $160 a
year—just $13 a month.
A term life
policy can provide cheap life insurance for a period when you need it most,
such as the term of your mortgage or until your kids graduate from college.
Plus, most term life policies offer the option to convert to a permanent life
policy. It’s a way to switch to lifelong coverage down the road, especially if
you develop health conditions that would make it difficult to buy a new life
insurance policy.
2. Buy Sooner Rather
Than Later
Your age and
health are two key factors that insurers consider when determining the rate
you’ll pay for life insurance. The younger and healthier you are, the less
you’ll pay for coverage. So if you want to get cheap life insurance, buy sooner
rather than later. You will lock in cheap life insurance for the term length of
your policy.
Don’t make the mistake of thinking you have time to make more room in your budget or get in better health before buying a policy. The cost of coverage will only go up each year you wait to apply. Plus, you risk developing more health issues as you age. For example, a Haven Life term policy with $500,000 coverage for 20 years would cost about $19 for a 30-year-old woman in excellent health. The cost of that same policy for a 40-year-old woman in excellent health would be almost $31 a month.
3. Create a Ladder of
Term Policies to Get More Coverage for Less
One of the
factors that influences how much you pay for life insurance is the amount of
coverage you buy. The larger the face amount, the higher the premium. To be
clear, you don’t want to skimp on coverage just to save money. You need enough
life insurance to protect those who depend on you for financial support.
Once you know
how much life insurance you need, you can keep down the cost of coverage by
using a strategy called laddering. When you build a life insurance ladder,
you buy several smaller policies that expire at different times rather than one
large policy to cover you for several decades. “You can definitely save money
by laddering,” Voegele says.
It can allow
you to have more coverage initially—perhaps when your children are young or when
you owe more on a mortgage—then taper off with time as your life insurance
needs decrease.
For example,
rather than buying a 30-year term policy with a $600,000 benefit, you could buy
10-year, 20-year and 30-year term policies with $200,000 worth of coverage
each. During the first 10 years, you’d have combined coverage worth $600,000.
The amount of coverage you have will decline as your term policies expire, but
the amount you pay also will drop over time.
4. Avoid Unnecessary
Riders
When you buy a
life insurance policy, you typically have the option to get additional features
called riders. You can add life insurance riders that allow you to waive
premium payments if you become disabled, to add coverage for your children, and
the list goes on. Although the extra
coverage might be appealing, you can get cheaper life insurance by avoiding
riders you don’t necessarily need.
5. Avoid Simplified
Issue Life Insurance
Traditionally,
if you wanted to get a life insurance policy, you had to get a medical exam.
However, it is possible to skip the medical exam with certain types of life
insurance policies. One is called simplified issue life insurance. This type of
policy might seem ideal because it usually requires only filling out an online application
with a handful of questions about your health and lifestyle and getting
approved (or denied) for coverage within a matter of minutes.
However, if you’re healthy, a simplified issue policy can cost twice as much as a policy that requires more thorough underwriting—the process insurers use to gather information about applicants. These policies cost more because insurers take on more risk when they have limited information about applicants.
If you’re in good health, there are fast life insurance options that are competitively priced, thanks to technology that quickly assesses your personal information. Companies such as Bestow, Ethos, Fabric, Haven Life and Ladder offer accelerated underwriting term life policies. Still, some policies require a life insurance medical exam in order to offer you cheap life insurance.
6. Shop Around
It’s easy to
get life insurance quotes, and quotes are free. Don’t settle for the first
quote you get. For starters, life insurance quotes you see online are often for
the lowest available rate, Voegele says. However, only a small percentage of
applicants actually meet the criteria to qualify for the best rate. Many people
discover that their final quote is higher after the application process. It’s also smart to shop around because
life insurance rates can vary greatly from company to company.
If you want to take a DIY approach, get quotes from several insurers. Otherwise, work with an independent insurance broker who works with several companies and will know which one is likely to give you the best rate based on your health and age.
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