Life insurance policies change with your life because your needs change as you age. It’s one of the reasons why there are so many insurance plans available. While being young and single offers the most straightforward life insurance policy, plans can be customized to suit your needs. These are the most common life insurance plans available:
How Can You Save on Life Insurance?
1) Use Comparison Tools. Comparison tools let you look at multiple policies and directly compare their coverage and rates. It’s a great way to get the most “bang for your buck” in your life insurance policies.
2) Prioritize Quality. Like most things in life, the cheapest option rarely saves you money in the long run. The same goes for insurance. While minimal coverage can protect you, it doesn’t offer the same benefits that you or your loved ones may need, especially in the event of sudden, severe illness or pre-existing medical conditions.
If you have pre-existing medical conditions, it is in your best interest to get a policy that takes that into account, even if it ends up being more expensive.
3) Understand Refund Fees. Administration fees, like refund fees, can really stack up. Take, for example, a cheap policy with refund fees of 12 per cent of the remaining balance, plus a $25 administration fee. The cheap policy will only give you back roughly two-thirds if it was originally $1,800. If there was a $2,100 policy without the 12 per cent remaining balance fee, you would get back $1,400 and lower your monthly costs overall.
4) Know About Monthly Vs. Annual Payments: Monthly payment plans are usually more expensive when you add up the payments, but they can sometimes be even more expensive if you return the policy, which is reimbursed based on “unused months.” Monthly payments mean you never have unused months.
Live Frugally, Save on Life Insurance
When it comes to saving on life insurance, your lifestyle is a big part of the equation. The best way to save money can be broadly split into two categories: the way you shop for premiums and the policies themselves.
First, a few tips on how to shop for insurance that will help you save money in the long run.
- Contact a Broker that Shops Multiple Companies. While companies set the rates, brokers have a list of the best insurance companies, and can hunt around for the best deal possible.
- Schedule Your Medical Exam for the Morning. Your blood pressure is generally lower before you exercise or eat. Lower blood pressure usually means better premiums.
- Assume You are in Regular Health. While almost all insurance companies have a “preferred” health class that offers better premiums, this is reserved for only the most active, healthiest people on the planet who also happen to have spotless family histories. Chances are you will not qualify as one of these, but in applying for it, you open yourself up to more extensive inquiry that could lead to higher rates than if you had assumed you are just another regular person in average health.
- Don’t withhold information during the medical questionnaire/application. If you lie or omit the truth on your medical questionnaire or application, your insurance company may cancel your policy or refuse payouts. Instead, be specific and share everything you think is relevant. That way, your insurance company will understand everything and offer a policy that works for you.
- Think Policy, Not Company Size. When it comes to insurance companies, you aren’t going to be able to predict which ones will still around in 20 years. Instead, look at what’s in front of you, your policy, and choose what’s right for you. If the company goes under, chances are your policy will be automatically transferred to another company.
On top of how you buy life insurance, here are some tips on finding the right policy to save you money:
- Double-Check if You Can Convert Your Policy to Permanent. Conversion features let you trade your policy in at any time for a permanent policy at a good rate without a medical exam. So, if you bought a policy and then become uninsurable or a higher risk, conversion will give you a great policy that doesn’t take your health changes into account.
- Less Coverage Does Not Mean Cheaper. Instead of less coverage, go for a shorter term. Just bear in mind that you will have to buy a brand-new policy when you are older, which usually means higher premiums.
- Don’t Worry About Renewability on Term Policies. Focus on getting the right term length for your needs over the ability to renew down the line. Renewal premiums have all but done away with the savings that were once around in buying your policy and renewing it in perpetuity.
- Investments and Insurance Don’t Mix. Buying insurance as an investment strategy rarely works out. The market is not designed for big payouts and you would probably be better off paying down some debt or saving up for a down payment on a home.