Aren't all life insurance costs the same?
People often make a general assumption that all life insurance carries the same basic cost. Affordable life insurance appears to be a "relative" term. Most are aware that life insurance tends to be inexpensive when you're young and more expensive when you're not. Certainly, life insurance premiums are based on both your age and state of health. Yet, there are other differences that vary with product and company.
Life insurance companies conduct careful examinations of their financial situation, cash reserves, operating expenses, desired profits, recent and projected loss experience, and competition, when establishing premium levels.
There are some ways to save money on life insurance because of the projections made by different companies. Take advantage of the loss experience and competition factor to locate the most cost effective solutions to your life insurance puzzle. You may enjoy a pleasant surprise.
Isn't term life less expensive than whole life insurance?
The often-stated belief that term life is cheaper than whole life insurance is actually a matter of perception and your definition of "expensive".
For example, some term life insurance products may schedule regular premium increases as your age bracket changes. However, in return for this feature, your company may agree to keep your life insurance in force no matter what happens with your health status. All you need do to keep this insurance in force is to pay your premiums. This term product may or may not be less expensive than a competing whole life insurance plan.
Should you select a term life policy that, instead of being open-ended, has a specified termination date, e.g. 10 years, you might save money on life insurance. Why? The insurance company, whether or not they guarantee a fixed premium level for the term, has a definable point at which they can reexamine your entire situation, including health status. After the term, they are under no obligation to issue any insurance coverage to you.
When you compare term life to whole life insurance, remember one important point. Only compare the "protection" portion of whole life plans, since part of your whole life premium goes to the cash build up (savings account) component. Since term life is a protection product, you should compare the cost of protection alone.
See also: Whole vs. term life insurance
Five ways to save money on life insurance
Here are five ways to save some money on life insurance, but understand there may be other factors that you learn when you perform an examination of policies and companies.
1. Shop around, shop around, and shop around.
The life insurance industry is not a monopoly and companies use different data or analyses when establishing premium levels. Never look at just two or three companies, see similar premiums, and assume your next eight choices will have the same costs.
2. Maintain your health and make lifestyle changes, if necessary.
Your state of health is a large determining factor in an affordable life insurance search. A simple comparison of the premium rates for non-smokers versus smokers will illustrate this point graphically.
3. Search for premium "discounts" for different levels of insurance coverage.
Don't assume that premium costs directly rise with increased coverage amounts. Sometimes insurance companies will charge lesser premium for different key amounts. For instance, you learn that Company A has a lower annual premium for $250,000 coverage than it does for $200,000. The higher amount sometimes triggers a discount.
4. Look for group insurance.
As you are probably aware, premiums for comparable life insurance coverage under a group policy are much less than with an individual policy. Along with coverage offered by your employer, you may also qualify for group insurance coverage in other ways. Are you a member of a group, organization, professional society, sports association, or other organized multi-person activity or hobby? Sometimes, they offer group coverage for life insurance products.
5. Examine the company charges for "fractional premiums."
Simple English: Paying your premium monthly or quarterly may cost you a lot more than paying annually. Some companies levy a high "administrative" charge for those who pay their premiums monthly or quarterly. If you (or your budget) prefer to pay premiums monthly, find a life insurance company that has only a small fee for this privilege. Otherwise, modify your budget to allow you to pay your premium annually and save money on your life insurance cost.
Perform a careful examination of life insurance products and companies. You may find other ways to purchase affordable life insurance coverage.