When shopping for life insurance, everyone is looking to save money and get the best insurance policy as well. There are many life insurance companies, banks, and financial firms that provide cheaper life insurance, but you can’t believe everyone. You can save money in different ways with your life insurance.
Here are 13 insider tips that can save you a great deal of money on your next life insurance policy.
1. Don’t settle on the first quote you receive
Don’t make the first choice your last choice. Compare rate quotes from at least five or ten different companies before filling out an application.
2. Apply to at least two different companies
It is free to take the life insurance exam. After you find the companies with the best rates, you should apply to at least two of them, especially if your premiums are higher than average. Just because you are quoted a rate doesn’t necessarily mean that will be your final rate; often times it won’t be. However, if you apply with multiple companies and one of the companies tries to increase the price during underwriting, you have options and bargaining power for the original or lower rate.
3. Purchase term life insurance
If you are a family with dependent children, most often term life insurance will be the best policy. You receive the most coverage for the lowest price.
4. Get in shape
Losing just a few pounds or lowering your blood pressure by just a few points could bump you into a better rating class. This could equate to saving hundreds or thousands of dollars. However, you shouldn’t wait to buy life insurance because you just never know when you will pass away. You can reapply at any time for free for the lower-rate class after you “get in shape.”
5. Pay annually
Life insurance companies will give you a discount if you pay annually. Often, you can save anywhere from 3% to 7% by just paying one installment each year vs. monthly payments.
6. Prepay the entire policy upfront
I once had a client pay for all 15 years in one payment. This isn’t common, but the life insurance company gives you a nice discount for paying the entire policy upfront.
7. Don’t buy Return-of-Premium (ROP)
Don’t buy a return of premium life insurance or “get your money back if you don’t die” life insurance. It’s about double the price of term life insurance with a zero percent return on your money. Instead, buy term and invest the money yourself.
8. Quit smoking
Almost all life insurance companies require you to be completely tobacco-free for at least 12 months to receive a non-smoker rate. Again, you don’t want to be without life insurance for a full year, just in case. It is best to secure a policy now and reapply when you have not smoked in a twelve-month period to receive the lower rate.
9. Convert your current policy
Most term policies allow you to convert some or your entire coverage amount to a permanent, no-lapse guarantee universal policy. Often, this will be the best option for someone who developed a major health problem during the policy term and will save you a lot of money instead of purchasing a new policy based on your health today.
10. Purchase while you’re young
It makes sense since life insurance rates increase every year as you get older. There is a saying in life insurance that you will never be younger and most likely as healthy as you are today, so life insurance will therefore never be cheaper than it is right now.
11. Ask for “reconsideration”
If you apply for life insurance and the underwriter increases your rate for a particular reason, such as your build or a previous health condition, ask your agent to fight for you for a better rate. I have done this on many occasions, and it does work—not all the time, but enough to definitely advise you to tell your agent.
12. “Ladder” your coverage
This is a strategy that not many people know about. Instead of purchasing one regular $1,000,000 30-year policy, buy two $500,000 policies, one for 30 and the second for, say, 20 years (or however long you need the coverage for). Using this example, you will have the full $1,000,000 coverage for the next 20 years when you will need it most, i.e., when your children are still growing up and in college, you have a large mortgage, etc., and then, say, in 20 years, when all that is past, you will still have the $500,000 for the next 10 years. This will save you a lot of money over the course of the policy. Also, another advantage of laddering is that if you ever run into financial difficulties, you have the option of canceling one policy while still having another in effect.
13. Reapply if anything changes
If you ever quit smoking, lose a lot of weight, or have had a significant health condition in the past and enough time has elapsed, you may be eligible for a much lower rate than when you first applied. It is always free to reapply for a lower rate, and even if the insurance company finds something new, they cannot take away the original policy. It is a win-win for you to see if you qualify for the lower rate.
So these are some money-saving tips for life insurance policies. Clear your doubts and queries before making a final decision.
