Many people think the only way to obtain life insurance is from those ads on television, hawking “guaranteed acceptance” insurance to people in certain age ranges, but while those products certainly fill a niche, if you’re reasonably healthy, and simply want protection in case of the worst, you can get life insurance at a lower cost by following these suggestions:
- Avoid Guaranteed Acceptance Insurance: While it’s true that those guaranteed acceptance or guaranteed issue life insurance policies don’t require medical examinations (though they do still ask a few basic medical questions), they’re much riskier for insurance companies, which translates into “more expensive for you.” These policies are usually purchased by people who have medical problems that preclude them from obtaining fully-underwritten policies. (Remember that Health Care Reform applies to health insurance rules, not life insurance rules.) If you’re reasonably healthy, or have some medical problems that aren’t dire (asthma, for example, but not cancer), you’ll save money on premiums by going through a medical exam and getting a policy that isn’t guaranteed. Guaranteed issue policies have both high premiums and low face amounts for death benefits, and with some of them you could end up paying more in premiums than your beneficiaries will receive when you die.
- Look for Low-Load Policies: Low-load and no-load life insurance policies include fewer built-in expenses, like agent commissions and fees, and this, in turn, generally means they cost you less. If you choose variable life insurance, this usually means that a higher portion of your premium goes toward building your cash value, right from the start. Be aware, however, that the companies which sell low-load and no-load companies are few and far between. Two such companies are TIAA-CREF and Ameritas Advisor Services, but they not be available nationwide.
- Think about Term Insurance: While some financial planners will push you toward permanent life insurance policies with cash value elements because they force you to save money, others recommend that you purchase term life insurance, because the premiums are lower, and tell you to invest the difference. The cash value in life insurance, however, should not be likened to a more traditional investment; any withdrawals or loans against the policy that you don’t repay will reduce your death benefit. As well, if you take a partial withdrawal from your cash value that exceeds the total of your premiums, that excess is counted as taxable income. The real advantage of term life insurance, however, is the price. According to the Society of Actuaries, you could pay ten times more for whole life insurance than for the same amount of level term life insurance, depending on the kind of term life insurance being compared. (Comparing premiums of a 30-year level term will give you a smaller multiple than a 10-year term.) Since your premiums will increase every time you renew a term life insurance policy, constant renewals are not financially wise. Instead, buy a long-term policy, or accept the fact that you will pay more, and buy a whole life policy.
- Consider Riders Rather than New Policies: There may come a time when you need you need to add more life insurance. It’s easy enough to run out and purchase a new policy, but before you do that, check to see if you can simply add a rider with extra coverage, to your existing policy. By doing this, you can expand the coverage you have without losing your built up cash value.
- Shop Online: Even though not every online life insurance quote will be the absolute cheapest, you can still glean a lot of information about prices by shopping online before you buy. The more personal information you give, the more accurate your life insurance quotes will be, and you can use multiple-quote comparisons to help choose which companies to pursue better deals with. The lowest quote you receive should be used as a baseline for all comparison shopping – online or off.
While all these suggestions will help you find low cost life insurance, the one important thing to remember is that no policy is everything to all people. A policy that suits your needs might not fit those of your best friend or brother-in-law, so rather than following anyone else’s “armchair expertise,” work with a financial planner, and determine what you really need, before you ever go searching for a policy you can afford.