How to save money on life insurance

How to save money on life insurance

How to save money on life insurance

There are ways to save when taking out life insurance, but it is not always necessary to pay lower premiums right away. As a first priority, find a policy that suits your needs. Buying bad benefits for low premiums is a waste, not a savings. Next, here are some ways to maximize your life insurance dollars.

Before you buy
Once you know what type of life insurance product to buy:

Focus on financial companies. Many companies sell life insurance. Limit yourself to companies with high ratings from two or more independent rating agencies. A low premium from a shaky company is not a good buy. See How to choose a life insurance company? More details. Shop around to find the premium you’re likely to pay. Internet pricing services can serve this purpose, or you can ask an agent or broker to provide you with a premium estimate. As part of this research, determine what type of rate you qualify for.

Most companies that sell individual life insurance have a number of different price ranges – usually called “Preferred (Non-Tobacco)”, “Standard (Non-Tobacco)”, “Preferred (Tobacco)” and “Standard (Tobacco). A small percentage of people have medical conditions or histories that disqualify them for even “standard” rates. Many of these groups are offered insurance at “limited risk” or “non-standard” rates. See group insurance. Consider joining a life insurance program sponsored by your employer, even if you have to contribute financially. Employers often subsidize the cost of group insurance, so it can be cheaper than individual life insurance.

You can get cover up to a certain level without having to show good health, which is an advantage for some people. You can pay your premiums through payroll deduction, which can be a nice convenience. However, be sure to compare group and individual rates, as depending on your age and health, group insurance may or may not offer savings. When comparing group and individual life insurance, remember that if you have more than $50,000 in group insurance, the IRS records how much it costs to provide the amount over $50,000 and charges you income tax on those costs.
Take care of yourself. Find out what type of rate you qualify for, and if necessary, consider making some lifestyle changes — don’t smoke, maintain a healthy weight, and exercise regularly — to qualify for a better rate.
When you’re ready to buy
Shop around and get a good price.

Life insurance is a very competitive business and you can find differences of hundreds of dollars (in annual premiums) even between financially sound companies for the same policy.
Consider the net cost index. How do you compare two policies, one with a premium that starts lower than one but ends up being higher than the other? Or the one with lower premium and lower cash value, the one with higher premium and higher cash value? Use the net cost index—a standard method for collapsing these variables into a single number.

The lower the number, the better, but ignore small differences (since indices are estimates based on assumptions, small differences may not indicate real differences in values). The agent or broker you are dealing with, or the company you are considering purchasing a policy from, will provide these index numbers.
Beware of premium discounts for certain sums insured.

Most companies offer discounts on certain amounts of insurance. For example, you may pay a lower premium for $250,000 life insurance than $200,000 or $500,000 life insurance than $450,000 because the discount “kicks in” the higher sum assured. Beware of “fractional premiums”. Typically, you can pay your life insurance once a year, once every six months, once a quarter, or once a month. Although a quarterly or monthly payment may seem easier to fit into your budget, some companies charge high fees for regular premium payments. Some charge a small fee for this.

If the company charges high fees for frequent payments, try budgeting to pay premiums once or twice a year. When buying a term policy, look for renewal guarantees. A renewal guarantee gives you the right to start a new term after your current term, pay higher premiums based on your current age, but without having to undergo a bag of health checks or produce a ‘proof of insurance’. Without a guarantee, you will have to purchase life insurance again, and if your health deteriorates, you may end up paying more or not getting it at all.

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