Four Simple Ways To Make Life Insurance More Affordable
According to a study by LIMRA, a financial-services research firm, the amount of families in the U.S. who are not covered by life insurance has increased from 22 percent in 2004 to 30 percent. These figures mark a 50-year-low in life-insurance coverage undoubtedly sparked by tough economic times.
Ironically, life insurance is actually that much more important when times are tough. However, many families find it hard to fit into their shrinking budgets and ultimately let their policies go to save money.
On a positive note, life insurance rates are actually at a 10-year-low. Combine that fact with the following four money-saving tips and you just might find a way to save money on your life insurance and keep it in the budget.
Step 1 – Determine the amount of coverage you need.
It is not uncommon for insurance-industry calculators to error on the side of caution prompting individuals to opt for insurance coverage that isn’t necessary. This calculation mishap can also force a person into life insurance coverage they can’t afford or leave them opting for no coverage at all. Sit down and take a serious look at the amount of coverage needed to take care of expenses and other necessities in the event of a claim.
Step 2 – Shop around for the best rate.
Many people purchase their life insurance and never consider evaluating their rate and coverage. Take car insurance for example, we consistently see insurance companies advertising they have the ability to lower your insurance rate. The same rule of thumb applies to life insurance. Keep in mind that life insurance rates have fallen drastically in the last 10 years. Despite the fact that you have aged since you purchased your life insurance, it is still likely to get a better rate by simply shopping around. As an example, a healthy 30-year-old male can purchase $250,000 of term life insurance for less than $155 a year. In addition, that rate can be locked in for up to 20 years. It is important to note that while life insurance rates are at an all-time low, prices vary by company.
Step 3 – Skip those monthly payments and opt for annual billing.
Most insurance companies offer a discount for paying annually instead of by month. For example, a healthy 35-year-old male can pay $14.44 a month for a 20-year term, $250,000 policy. That same individual can pay just $165 (versus $173 when paying monthly) upfront for the year. The larger the policy, the better the savings when paying annually.
Step 4 – Save money with term insurance.
There are two types of life insurance, permanent and term. Permanent insurance, like universal life and whole life, only expire when you stop paying the premium. This type of insurance also builds cash value that the policyholder can then borrow against or withdrawal. Now consider term insurance, which provides life insurance at a fixed rate for a predetermined amount of time. While permanent insurance obviously has its benefits over term, the downfall is the difference in premiums. Opting for term insurance allows the policyholder to purchase more life insurance than if he or she where to invest in a permanent policy.
If purchasing the amount of life insurance you need means the difference between buying term or permanent, many advise opting for term. At the very least, this option allows you to provide the coverage your family needs. In the event that you will need insurance for more than 20 to 30 years, you can purchase a convertible policy that slowly changes from a term policy to permanent as your personal income grows and you can afford to pay the higher premiums.