How to Save Money Buying Life Insurance

Life insurance is a must-have for anyone with dependents, but it isn’t cheap. That said, there are ways to secure your family’s future without completely gutting your wallet.

December 15, 2020

Many personal factors impact the cost of life insurance. While some are not in your control, others are. For instance, while you can’t do much about your family’s medical history, you CAN maintain a healthy lifestyle to lower your life insurance costs. Likewise, buying insurance early in life can lead to substantial savings on life insurance.

Continue reading to find out all the things you can do to lower your life insurance premiums.

Buy Life Insurance When You’re Young

Your date of birth is the biggest factor impacting your premium rate. The younger you are, the further away you’re likely to be from your death as predicted by average life expectancy. Consequently, you’ll pay a lower premium for life insurance.

Both term and permanent life insurance offer level premiums. That means the premium is locked into the same rate throughout the contract. However, since a term life policy comes with an expiry date, you’ll have to renew it periodically to maintain coverage. At each policy renewal, you’ll see a rate increase based on your age at that time.

Don’t Smoke

Young guy smoking a cigarette

If there’s one thing life insurance companies don’t like, it’s an early death. That’s because it means they’ll have to pay out before they can collect more premiums.

As a result, insurers charge higher premiums for those at the highest risk of early death. And there are few things that significantly increase the risk of early death as much as smoking. People who smoke die ten years earlier than non-smokers on average.

So it comes as no surprise that smokers have to cough up (excuse the pun) more for coverage. How much more? Smokers pay two to five times more for life insurance than non-smokers.

However, if you’re a smoker, all is not lost.

Kick the habit, and you can enjoy impressive savings on your life insurance savings. You’re likely to qualify for a lower rate a year after quitting smoking, although the new rate still won’t be as low as the nonsmoker rate. To qualify for that, you’ll have to stay smoke-free for three to five years.

Stay Healthy

Healthy people are likely to live longer than people with health conditions, like diabetes or heart disease. If you maintain a healthy lifestyle and don’t have any severe or chronic illnesses, expect to pay less for coverage.

Get the Right Life Insurance Product

Group of people in a business meeting.

Life insurance needs aren’t one-size-fits-all. Before you sign up for a policy, consider the following three questions:

Life insurance products come in two types — term life and permanent life.

Term life insurance covers you for a limited period of time and is considerably cheaper than permanent life insurance. It may be an ideal solution if your financial needs have an end date. For instance, if you want coverage until your children complete college, the mortgage gets paid off, or you reach the retirement age, you may be better off buying term life insurance. Since term life insurance is cheaper, it could also make sense for those who want affordable coverage.

Permanent life insurance, as the name suggests, covers you for your entire life. Many permanent life insurance policies also build cash value and double up as an investment tool.

Since the coverage lasts as long as you, it is more suited for financial needs without a definite end date. For example, you may want to consider permanent life insurance if you want to leave a legacy for your heirs. It may also be the right option for someone with lifelong dependents or those who want to pay for their end-of-life expenses. Lastly, high-net-worth individuals looking for a life insurance savings plan may also benefit from buying permanent life insurance.

Present a Strong Case If You Have Medical Issues

A sick lady with her arms up on her face.

Insurers use a process called underwriting to determine insurability. The practice of underwriting is constantly evolving due to improvements in data gathering and medical advances. As a result, some medical conditions that could cause a denial a few years back may now be insurable.

For example, instead of denying coverage to someone who has had a heart attack, insurers may now look at additional information such as:

  • Was there any heart damage?
  • How well is the patient is taking care of controllable risk factors, like smoking, physical inactivity, and obesity and overweight?
  • Are blood pressure and cholesterol levels in control?

A life insurer will see a heart disease patient who exercises regularly and doesn’t smoke more favorably than someone who continues to smoke after a heart attack.

Each insurer has different underwriting guidelines. Some companies are more lenient than others for specific conditions, so shop around to get the best rate if you do have a medical condition.

Compare Prices

A mini shopping cart beside a laptop computer.

The best way to save money on life insurance is to shop around. No single insurer is the lowest-cost provider for all. Some may offer young applicants a better deal while some others may prove more cost-effective for people with health conditions.

The only way to ensure you get the best bang for your buck is to grab quotes from multiple insurers and compare them. Don’t make your decisions based on email fliers or TV commercials.  

Ask for a Rate Evaluation If Your Health Improves

If you already have life insurance, you may think your premium rate is set in stone. But that’s not the case. Your premium can decrease in certain situations.

Requesting a re-rating is a good idea if your health has improved significantly since you purchased the policy. You can always request to be reevaluated. However, getting re-rated isn’t guaranteed. Nevertheless, there’s no harm in asking because the insurer can’t bump up your rates if it uncovers something new.

For a reevaluation, you’ll have to undergo a medical exam. If the insurer sees that you are now less risky to insure, it will reduce your premium rate.

So what justifies a reevaluation request to your life insurer? Here are a few examples:

  • You had a medical condition that has been cured or significantly improved
  • You’ve quit smoking
  • You’ve lost a significant amount of weight and can show you’re keeping that weight off

Conclusion

Cost is the biggest reason many people give for not buying life insurance. But it shouldn’t be so. Life insurance, particularly term life, is often cheaper than many think. You can also save money by buying a policy early in life, maintaining a healthy lifestyle, quitting smoking, and comparing quotes. And if you already have life insurance, don’t forget to ask for a re-rating if your health has improved considerably since you bought the policy.

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