How to Save Money When Buying Life Insurance
There are a number of ways you can save money when buying life insurance, but it doesn't always mean lowering your premium payment right away. As a top priority, find a policy that meets your needs. Getting the wrong benefits for a low premium is a waste, not a savings. Beyond that, here are some ways to maximize your life insurance dollars.
Before buying
Once you have determined the type of life insurance to buy consider the following:
Focus on companies that are financially sound. There are dozens of companies that sell life insurance. Limit yourself to looking for reputable ones with high ratings from two or more independent agencies. A low premium from an unstable company is not a good buy. For more details read the article How to choose a life insurance company?
Look in various places so you have a true idea of what you are likely to pay. There are estimating services on the internet that can help you, or you can ask an insurance agent or broker to give you an estimate of a premium based on your age and need for coverage.
As part of this search, determine which fare class is best for you. Most companies that sell individual life insurance have different types of prices — usually called "preferential (non-smokers)," "standard (non-smokers)," "preferential (smokers)," and "standard (smokers)."
A small percentage of people have health conditions or medical histories that disqualify them from even a standard rate. Many in this group will be offered "impaired risk" insurance or "non-standard" rates.
Consider group insurance. Take into account the possibility of participating in the life insurance program sponsored by your employer, even if you have to contribute to it financially, or what is the same as paying part of the premium. Employers often subsidize the costs of your group insurance, so it may be cheaper than individual life insurance. Also, you may be able to get coverage up to a certain amount without having to offer evidence of good health, which is an advantage for some people. And you will probably have to pay premiums that will be reduced from your salary, which would be very convenient.
However, be sure to compare group and individual insurance rates, as depending on your age and health condition, group insurance could offer you some savings. When comparing group and individual insurance, keep in mind that if you have more than $ 50,000 in employer-paid group life insurance, the IRS will determine how much it costs to provide the amount greater than $ 50,000 and interpret the portion that the employer pays for you as income and therefore taxable.
Take care of your health. Find out what classification you will fall into, and if necessary, consider making some lifestyle changes — don't smoke, maintain a healthy weight, and exercise regularly — so that you qualify at a more favorable rate.
When you are ready to buy
Search well for a good rate. Life insurance is a very competitive business, and you will find differences of hundreds of dollars (for annual premiums) even between financially strong companies, for basically the same policy.
Consider the net cost index. How can you compare two policies, a policy A with premiums that start out lower than another (policy B), but then those of policy A go up and become higher than that of policy B? Or a policy with low premiums and a low equity (a low cash value) versus a policy with higher premiums but a higher equity (a higher cash value)?
This is done using the net cost index — a standard method for joining these variables into a single number. The smaller the number you get, the better, but ignore small differences (since the indices are guess-based approximations, small differences are not significant in values). The insurance agent or broker you are dealing with, or the company you are considering purchasing a policy with, will provide you with those rates.
Consider premium discounts for particular amounts of insurance. Most companies offer discounted rates for specific amounts of insurance. For example, you could actually pay a lower premium for $ 250,000 of life insurance than for $ 200,000, or for $ 500,000 of life insurance than for $ 450,000, because the insurer offers a discount on one of these larger policies, which would put you in the higher insurance amount without having to pay more.
Be careful with fractional premiums. Typically, you can pay your life insurance premium once a year, once every six months, once a quarter, or once a month. Although paying quarterly or monthly may be easier to manage within your budget, some companies impose high finance charges for paying premiums in multiple parts. Others impose small charges for doing this. If a company charges you a lot to allow you to make installment payments, but it is the best insurance option you have ever received, adjust your budget so that you can make your payments only once or twice a year and save on financing costs.
If you are buying a term policy, look for the ones that offer renewal guarantees. A renewable guarantee gives you the right to start a new term after your current one ends, paying a higher premium based on your current age, but without requiring you to take a new health exam or present any other "evidence to make sure ”. Without the guarantee, you will have to look again to buy life insurance over and over again, and if your health deteriorates, you will have to pay a lot more or you might not be able to get new insurance.
