The following are some of the easiest ways to get a lot on a life insurance policy. You can easily save money on your life insurance premiums by applying the following tips while still having the right amount of insurance for your needs.
Ways to save Money from your life insurance
1. Buy while you are still young and healthy
Your overall health and age are two of the main variables that decide how much you’ll pay in premiums.
The earlier you buy a policy, the less you will have to pay as compared to waiting a few years. The explanation, of course, is linked to the increased risk of becoming older.
Upon providing a quote, a health class will be allocated to you based on the answers you give about you.
The more you get a health ranking, the higher you’ll go up in the insurance tier, which means lower premiums.
If you can lock in a policy at a fixed premium rate, you also give yourself the opportunity to stop charging high premiums.
Let’s say when you turned 30 you bought a $250,000, 20-year life plan, at $15 a month.
Your health begins to decline after reaching 40 years of age and a few minor health problems begin to show up.
When you’ve tried to buy the same package at this age and state of health, the annual premium you’ll pay would be much higher.
But, when you bought it at a fixed rate earlier, you avoided the issue of high premiums associated with older age and reduced health conditions.
2. Locate your benefit sweet spot
Life insurance firms are selling their death benefit plans in parts, each of which has a different cost per 1,000. These are called life insurance rate bands.
For life insurance firms it is standard practice to directly discount their premium rates if you purchase a higher face value number.
This arrangement helps individuals to likely get more benefits with a lower profit rate at close to the same price.
For example, let’s assume a $200,000 death benefit cost $190 per month (the fall within the $100k-249k rate band).
Bumping the program into the next rate range ($250k-499k) would lead to a lower rate per thousand.
In this scenario, a $250k death payout will cost just $195 a month, or an extra $5 a month in return for an additional $50,000 in overall benefits. This helps you to take out more insurance per dollar.
3. Shop around
Life insurance policies will differ considerably from insurer to insurer. It’s suggested to get and compare several quotes so you can weigh your choices and land the right strategy for your needs.
Before you look around, make sure that you have a good understanding of the various life insurance forms (which I have discussed below) so that you can guarantee that you get the right policy for your situation.
Do your due diligence, and don’t get anything just because it was suggested by a family member or relative. It will fit in with your own needs.
4. Pay annually
Most businesses are offering discounts on annual subscription fees. The discounts range from 2 per cent to 8 per cent on average relative to monthly payments.
If your budget allows, go to the annual payments to save on premiums a little more.
5. Get your health class started
Often the wellbeing of a policyholder improves enough that it’s significantly better than when they first bought the policy.
For example, someone who used to be obese before they signed up for insurance and who had high blood pressure is now of average weight and health.
After years of using exercise and diet to adopt a healthy lifestyle, they will now apply for a higher insurance class and be compensated with lower premiums.
Most insurers require policyholders to request a reconsideration of their health status if it is reasonably important and they can demonstrate evidence of improved health.
6. Take the necessary medical exam
There are certain policies which allow you to completely skip the medical examination. These are referred to as Guaranteed Issue or Assured Life Insurance or simply No Exam Life Insurance.
But while it sounds good, it features only a modest gain payout (usually less than $50,000) and comes with fairly large incentives.
That is to counter the added risk the insurance provider is taking in most situations to guarantee a payout to someone who is deemed uninsurable.
This is why most policyholders would only consider signing up for No Exam insurance as a last resort and can not get cover elsewhere.
7. Work with an Independent agent
Life insurance is a very large undertaking. You are literally giving your loved ones financial security should the tragic incident happen.
That said, it’s important that you have a program that’s tailor-made for your needs and you’re going to have the peace of mind of ensuring your family is going to take care of it.
An independent life insurance agent can help you with the following:
- Allows you to choose from a wide range of options based on your preferences
- Helps you to buy a policy from the right insurers for you
- Creates a customized policy that fits your needs and budget
- Helps you to do your job from start to finish, saving you tons of time and effort.
Types of life insurance
Now that you have some good tips to make sure you get a lot on a policy, it’s time to get a quick summary of the various life insurance forms to help you with your decision.
Term life insurance
It’s a kind of life insurance that provides the beneficiaries a death payout if you die within the coverage span agreed upon.
This is the most convenient and inexpensive kind of life insurance available.
Due to its excellent price-to-value ratio and straightforward approach it is a common option. It is the best kind of life insurance for the majority of people, by far.
Permanent life insurance
It is a form of life insurance that covers your entire life and includes an investment portion, or more commonly referred to as the “cash value.”
You can grow at a guaranteed rate, or you can invest it in an index or sub-account (depending on the type of permanent life policy you receive.
The Policyholder will use the cash account for a variety of ways. They can take out a loan against it, remove a part, or leave it unused on certain policies for future cash dividends.
Often, after the cash value has risen substantially, you can use it to pay for the incentives that remain on the contract.
Because of this cash part, permanent life insurance is more money demanding than term life insurance
Universal life insurance
It is a form of permanent life insurance which gives you more flexibility to pay your premiums. You may use the cash value to change the amount of the premium you pay per year (note: you will always need to pay the minimum policy premium).
If you’re looking for a lifetime strategy and want the freedom to change incentives using the cash value (and the right to borrow from it), then Universal life is a good option.
Variable life insurance
It’s a kind of permanent life insurance policy that includes Universal Life’s same flexible payout plans and the ability to change the death benefit. How the cash-value receives money is where they vary.
VUL invests the cash value in “sub-accounts,” similar to the operation of the mutual funds. Such sub-accounts are invested in the stock market which means that the gains or losses of the cash assets are decided by their results.
Universal life insurance on the other hand raises money from the interest paid on the cash value.
Guaranteed issue life insurance
It is a form of permanent life insurance that doesn’t allow you to take the medical test and guarantees immediate protection.
But, because there is no medical underwriting involved, the premiums are far higher and the benefits amount is much less than what you will receive from other insurance forms.
Final expense insurance
Often called burial or funeral policy. It’s usually bought by elderly people trying to fund end-of-life expenses.
Factor associated with life insurance premiums
How exactly are insurance companies calculating the premiums? The following are the key criteria they consider when signing up to your application.
- Sex-Women usually pay a lower premium because evidence indicates that on average they live longer than men.
- Age – The shorter life span dramatically raises the risk level which is why premiums increase with age.
- Your Wellbeing – The healthier you are, the less risk that results in better premium levels is correlated with that. Individuals are categorized according to a guideline on the health level.
- Term and amount of coverage – How much lump sum of the death payout and how long you will be compensated to decide the premium levels, too. The greater the death benefits the longer-term policy and the more costly the premiums would be.
- Height and weight-Underwriters use a table to calculate the Body Mass Index (BMI) of a individual. If you want better rates you would want to be rated with a normal BMI.
- The State You Live In-Various states have different living conditions, and the insurance provider acknowledges that.
- Lifestyle – The underwriter would ask whether you engage in some sort of extreme hobbies or part-time activities (skydiving, race car driving, and other related activities) as these increase your risk level significantly.
- Smoking – People who smoke are often measured with a more costly premium because of the possible diseases and health issues that that result from smoking.
How much your life insurance would cost depends on your own particular requirements and the outcome of the underwriting. Make sure that some of the tips listed here are used to get a lot when buying a life insurance policy.