Affordable Term Life Insurance: How To Get Cheaper Premiums
One of the top reasons people don't buy life insurance policies is the cost. If you add up loan payments, living expenses, and housing costs, more often than not, people won't have enough money left to pay monthly insurance premiums.
Still, getting financial protection doesn't have to cost an arm and a leg. In this article, we'll share information on how companies determine life insurance rates. We'll also give you several tips on how you can lower the cost of your premiums.
Understanding Term Life Insurance
Term life insurance policies provide coverage for a set number of years. If the insured individual (usually the policy owner) dies within the coverage period, the insurer pays a death benefit to the owner's beneficiary.
With that said, it's good to consider life insurance if there are people who depend on you financially. It's also an indispensable tool to help your family settle your debts even if you pass away before you're able to pay off the loans completely.
The coverage period usually comes with a 5, 10, 15, 20, or 30-year term. Unlike whole life (or permanent life) insurance), term life insurance needs to be renewed once the term ends, or else you'll be left without insurance coverage. Term life insurance also doesn't accumulate cash value.
How Much Does Term Life Insurance Cost?
On average, people in their 20s or 30s pay somewhere between $10 to $50 a month for a term life insurance policy. In comparison, a whole life insurance policy can cost up to 15 times more.
Factors That Affect Life Insurance Pricing
The cost of life insurance premiums isn't the same for everyone. Here are some of the factors that companies consider when determining the cost of your coverage.
Length Of Coverage Period
One of the first things you should think about when buying a term policy is how long you'll need insurance coverage. For this, you'll have to list all your financial obligations, which may include college plans for your children, the living expenses of your dependents, and any outstanding debt.
Think of how long you'll have to continue paying for financial obligations. That will help you decide the length of the term life insurance you need. Young people will likely require a 30-year term, while older folks can opt for a 20-year term or less.
Amount Of Life Insurance Coverage
If you buy a life insurance policy that pays out a benefit that's higher than what you need, you're unnecessarily paying for more expensive premiums. If you want affordable life insurance, your coverage should be just enough to provide your family with the financial protection they need.
Ideally, you should get a policy that pays out a death benefit that's equal to 10 to 15 times your annual salary. That should be enough to cover your beneficiary's expenses for the next decade or more.
Any life insurance company will consider your age as one of the primary factors in deciding how much your premiums will cost. Younger people usually outlive the term of their policy, so they pay less.
Aside from age, a person's gender is also considered. Women tend to live longer than men, so they usually pay more affordable premiums.
Finally, your occupation will also play a role in how much your life insurance will cost. Some jobs, such as being a pilot or a truck driver, can drive up your premiums.
Generally, life insurance companies classify applicants into different risk classes. These include:
Super preferred: Individuals who qualify for this class have excellent health, don't engage in risky hobbies, and don't have a dangerous occupation. They also don't have a history of smoking within the past five years.
Preferred: People who fall under this category likely have the same profile as those who qualify for the super preferred class. However, they may have a minor health condition or belong to a family with a complicated medical history.
Standard: The majority of people fall under this class. This includes people who have a higher BMI, are taking a few medications, and have a few marks on their driving record.
Substandard: This classification includes people who have significant health conditions, have a history of alcohol abuse, or and have been diagnosed with mental health disorders.
Your life insurance premiums will depend on which risk class you're assigned to. The lowest premiums go to those who are in the super preferred class, while the highest ones are charged to those who are listed under the substandard class.
Note that not all life insurance companies treat medical conditions the same way. For instance, some companies offer cheaper premiums for people with high blood pressure or those living with specific types of cancer. It's best to work with your agent to find a life insurance company that is most accommodating to your individual condition.
How To Get Low-Cost Term Life Insurance
As they say, the best term life policy is the one that you can afford. Consider the following steps when shopping for a term policy, so you can find the best one within your budget.
Find An Independent Agent
One common misconception is that getting an independent agent is more expensive compared to buying directly from an insurance company. However, remember that life insurance is a highly regulated industry, so agents can't charge you too much in terms of commissions.
So, what are the advantages of working with an independent life insurance agent? For one, they won't pressure you to buy a policy from a specific company. They usually represent several insurers, so you'll have a broader range of options.
They can help you compare policies easier. They'll look at your individual needs and situation, then recommend the best life insurance for you.
Buying a term life policy should be just like buying a car. Consider all your options first by requesting quotes from multiple life insurance companies. You can also compare different types of life insurance.
Work closely with your agent to find the best term life policy for your needs. You can compare them manually or use internet comparison tools.
Choose Policy Options Wisely
Life insurance policies usually come with "insurance riders." These are additional benefits that are separate from the amount that beneficiaries receive if the insured person passes away.
Some life insurance riders like disability, critical illness, or long-term care protection are useful, but getting all of these add-ons can drive up the cost of your policy significantly. Check if buying another full policy is cheaper than getting a ton of add-ons for a single one.
Tips On Getting Low-Cost Life Insurance
Now that you know what factors affect your premium payments, here are some additional tips to lower your policy’s price.
Ideally, you should buy a term life insurance policy as early as possible. Life insurance companies always offer lower rates to young people because they're less likely to die within the coverage period. Delaying the purchase for 10 years can cost you $2,720 over the life of the policy.
Not only that, starting young will allow you to lock in cheaper premium payments for the entire duration of the policy. So, you'll be paying the same low rates decades later.
Opt For A Lower Death Benefit
If you're starting your first job or are still paying off student loans, buying term life insurance with extensive coverage may not be within your budget.
If you find yourself in this situation, try to remember that you can start small. Look for a policy with a smaller death benefit, which translates to lower premiums. Once you've established your financial footing, buy another policy that fulfills all your financial needs.
It's still possible to buy term life insurance at low rates even if you're above 50, especially if you're healthy. As long as you take care of your health, you'll be able to get cheaper life insurance compared to those with preexisting health conditions.
Some things you should particularly avoid are smoking and excessive drinking. Any insurance company that sees that you're a smoker or heavy drinker will charge you higher premiums for the same coverage.
Another way to get cheaper life insurance is by managing your weight. People who are medically classified as obese pay higher premiums.
Buy Decreasing Term Life Insurance
If you have debt or dependents, you can opt for decreasing term life insurance. This is a type of policy with a death benefit that decreases over time.
You might be wondering: what's the advantage of a decreasing death benefit? People require less insurance coverage later in life because they're likely to have paid off most of their debts. Their children will likely become financially independent decades later, as well.
Premiums for this type of policy are lower compared to level term life insurance, which pays out a constant death benefit during its entire effectivity period.
Try The Ladder Strategy
If you're serious about getting term life insurance at affordable rates, you can opt for the ladder strategy. This refers to the practice of buying multiple term life insurance policies early in life, then allowing them to expire over time, as your need for insurance coverage decreases. That way, you're only paying for the coverage you need.
Prepare For A Medical Exam
During the medical exam, doctors will check your height, weight, pulse, and blood pressure. You're also going to be required to provide a urine sample and get your blood drawn. Those who are above 50 may also have to take an electrocardiogram (EKG).
You can't cheat on your medical exam, but you can prepare for it. For example, you can try to limit salt and cholesterol intake a day before your test. You can also avoid over-the-counter medicine and nicotine. Finally, try to avoid alcohol and caffeine.
Some insurers offer discounts to people who are able to pay a lump sum rather than paying monthly or quarterly. Other companies also offer discounts depending on the coverage amount you choose.
Maintain A Clean Driving Record
People who have at-fault collisions on their driving record pay higher life insurance premiums. Not only that, if you have a vehicle, it's also likely going to increase the cost of your auto insurance.
Insurers refer to information from the MIB group, which keeps a record of your medical conditions and traffic violations. If you're a fan of auto racing, the group will likely have a record of that, as well. Note that you can also request your record from MIB to check the information's accuracy.
Some life insurance companies also consider your finances during the underwriting process. Statistically, people who have better credit are more likely to pay premiums on time. They also take fewer risks and are less likely to make claims.
Avoid Risky Hobbies
If you're a fan of skydiving, rock climbing, scuba diving, hunting, or motorcycling, you can expect to pay more for your insurance coverage. That's because engaging in these activities is likely going to put you in a higher risk category.
Keep in mind that you can't lie on your life insurance application. If your beneficiaries file a claim one day and the insurance company finds that you've failed to declare any of your risky hobbies, they might not get the death benefit.
Take Advantage Of Group Life Insurance
Most employers offer group life insurance to their employees. They'll pay part of the premiums, so you'll be able to get a term life policy at a reasonable price. The downside is that the policy will terminate once you leave the company.
Buying life insurance at a reasonable price is possible if you take extra steps to ensure you're getting the best deal. Some of the things you can do are hiring an independent agent, comparing quotes, and opting out of some policy riders.
If you need more information about getting low-cost insurance, contact Wesley Insurance, LLC. Our friendly and knowledgeable agents will help you get the coverage you need at rates that are within your budget.