This helpful list comes from a blog post on the InsWeb blog entitled “Top 10 Money Savings Tips for Term Life Insurance.” InsWeb is a leading provider of life insurance quotes among other insurance related services.
1. Buy when you're young - Many people may feel they don't need life insurance when they are young. While your financial needs may be lower at a younger age, the rates are also substantially cheaper when you're young.
2. Your “half” birthday could be costly - While some companies raise their prices based on your actual age, most companies increase the price of their policies six months before your birthday. It's a term called “Age Nearest” in the industry, and that half-year price increase could really add up over a 20-year term policy.
3. Select the right length of coverageEveryone has different needs, and not one size fits all when it comes to term life insurance. While it may make sense for people in their 30s and 40s to secure a 20-year term length, a 10-year term might be more appropriate for someone nearing retirement. 4. Check for price breaks - Companies often offer “price breaks” at certain coverage amounts (e.g., $250,000 vs. $225,000). The truth is that many people can actually pay less money for more coverage. Check how little your prices increase when you increase coverage to $250,000, $500,000, or $1,000,000.
5. Buy the right amount of coverage - Many agents may try to sell you more coverage than you need. The purpose of life insurance is to “indemnify” (replace financial loss), and what most people should be looking for is income replacement for their beneficiaries. Independent financial planners recommend the following rule of thumb: purchase an amount of coverage equal to 6-10 times your annual gross income.
6. The right hobby with the wrong company could cost you - People who participate in high-risk sports or activities (such as hang-gliding, skydiving, mountain climbing, scuba diving, and racing), or even those who like to have an occasional cigar could very well pay more money if they don't pick the right company. Every company looks at risk factors differently and some are more liberal in certain areas than others. Speak with a licensed insurance expert and make sure they have all the underwriting criteria at their disposal and match you with the right company.
7. Work policies aren't always the best deal - While purchasing a life insurance policy through your employer is convenient, it may not be the best deal available to you. Work policies are often based on a composite profile of the employees you work with, many of whom may be less healthy than you, or have other underwriting factors that might drive up rates.
8. Check out your payment/billing options - Many life insurance companies offer discounts to consumers who pay their premiums annually, or who pay monthly by electronic funds transfer (EFT).
9. Review your policy often - Do a review of your life insurance policy a minimum of every three years, if not more often. Rates may be lower, and your circumstances may have changed, necessitating more or less protection. If you are replacing a policy, make sure you allow enough time to get your new policy in place so coverages won't overlap or lapse.
10. Don't overspend on protection - Term life insurance is the most affordable and cost-effective pure protection available, and it is typically much less expensive than a comparable whole life policy. The old axiom still rings true: “Buy Term and invest the difference.”
Every single person and family situation is different when it comes to purchasing the right amount and type of life insurance. The last tip mentions whole life insurance as if that is the only option to term. There are many other types of permanent life insurance products, universal life, variable life, etc., that may or may not be suitable for your situation. Talking with a trusted and knowledgeable insurance agent or financial advisor is critical in order to navigate the life insurance waters.
Related Blog Posts:
A Personal Story Of The Importance Of Life Insurance
Buying Insurance Directly Or Through An Agent?
Temporary Insurance Is Term Insurance
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