Tip 1. Always Use an “Independent” Life Insurance Agent
This is our most invaluable tip that can save you hundreds if not thousands of dollars when buying life insurance. There are 3 types of life insurance agents that you can use to buy life insurance including:
- Company agents
- Call-center agent
- Independent life insurance agents
Unfortunately, company agents and call center agents work off of commission and not for you. Company agents only represent usually represent 1 or possibly up to 3 companies, not dozens. You have either no or very limited options when it comes to what you pay, so obviously you are not getting the best rates.
Call center agents have to sell a certain number of policies each month just to keep their job, so their only objective is to make a quick sale. They do not provide quality customer service – once they sell to you, you won’t likely hear from them again unless it’s their voicemail.
Independent life insurance agents, like the ones here at JRC, take the time to build relationships and understand their client’s needs. We take the time to fully evaluate your individual needs and we will advise you on all your options, not just the option that earns us the biggest commission.
Additionally, we have access to multiple companies and we know which companies are more lenient for a host of health issues. We will also comparison shop for you, and custom design your life insurance for the most affordable rates.
Bottom Line – Always use an independent life insurance agent to save money on life insurance.
Tip 2. Buy Term Life Insurance
Many company agents these days are peddling permanent life insurance policies, such as whole life for example. The vast majority of Americans who need life insurance should avoid these policies and buy term life insurance, and invest the difference.
Permanent policies such as whole life can cost as much as 10x more than a term policy. In addition, because permanent life insurance is so expensive, you might end up choosing lower death benefits so you can afford the policy, which could leave you under-insured.
Would you rather pay $30 a month for a $500,000 in death benefits, or between $250 and $300 a month for a whole life insurance policy?
Bottom Line – Buy term life insurance.
Tip 3. Buy Life Insurance When You Are Young
Regardless of whether you buy term or a permanent life insurance, buying while you are young can save you a lot of money down the road. Life insurance begins to become increasingly more expensive beyond age 35.
The reason for this is because you are more likely to begin developing health issues such as higher cholesterol, weight gain, and likely see a rise in your blood pressure rates as you age.
Life insurance underwriters rate you according to their health classifications, and each change from one classification to the next can mean a difference of 25% in what the premium might be.
Bottom Line – The younger you can buy life insurance, the more money you will save.
Tip 4. Don’t Pay Smokers’ Rates
If you currently smoke – quit! A smoker typically pays as much as 50% more for the same policy that a non-smoker does. And if you are only a recreational user of tobacco products such as smoking only a few cigars or the occasional cigarette, e-cigarettes, or are a recreational marijuana smoker, many life insurers will still charge you smoker’s rates.
However, there are a number of companies that are much more lenient for occasional users, which generally only independent agents know about, so you can save a lot of money there as well. If you are a regular smoker and have quit for at least a year, you can be re-evaluated or have your policy re-written to get non-smokers rates!
Bottom Line – Quit smoking.
Tip 5. Married Couples can Save Buying Joint Life or Survivorship Policies
If both parties in a relationship need life insurance, don’t buy separate policies. You can achieve the same amount of coverage by buying what is called a “Joint Life” or “Survivorship Life” (also known as ‘Second to Die’) policy, which is a lot cheaper than buying 2 separate policies. Benefits are paid to the survivor when the first of the partners dies.
Bottom Line – If you are married or business partners – buy joint or survivorship life insurance.
Tip 6. Buy More Than 1 Policy – Called “Layering” or “Staggering”
Many people just buy 1 big life insurance policy, but this may not be necessary. There are multiple reasons why people buy life insurance, such as for:
- Income replacement
- Cover the mortgage
- Pay for children’s college tuition
Life insurance can be used for different needs AND for different time periods. Suppose you want $500,000 to cover income replacement and $250,000 to cover your children’s college education. You might think that you should just go out and buy a $750,000 policy.
But, if you instead bought a 30-year term policy of $500,000 for income replacement, you might only need 15 or 20 years to cover the mortgage or the kid’s tuition.
So instead, buy one 30-year term policy with $500,000 to cover income replacement AND another separate 20-year term policy for $250,000. By doing so, you will save money on the 2nd shorter term, which you can also cancel anytime when you no longer need the coverage!
Bottom Line – Buy multiple policies of different terms for multiple reasons.
Tip 7. Only Buy Death Benefits That You Need
Never guess on how much life insurance you need, and buy only what you need. If you choose death benefits in excess of what you really need, then it’s obviously going to cost you a lot more.
For some people, they simply do not know how much they should really buy. Most insurers suggest that you should ideally choose around 5-10 times your current salary for death benefits, but an experienced independent life insurance agent could guide you when it comes to choosing the right amount.
Bottom Line – Choose the right amount of death benefits.
Tip 8. Consider “Specialty” Short-Term Policies for Loans
Many people who take out loans, especially business loans, are required to get life insurance to protect these loans.
Many people believe they will be stuck with having to buy a 10-year term policy (which they believe is the smallest term policy offered by most insurers).
Not so! You can actually find much shorter term policies, such as 1-year “renewable” terms, and there are some insurers that offer 5-year terms. These are known as “Specialty Term Policies.” They tend to be cheaper and more convenient for those need short-term life insurance.
Bottom Line – Ask your independent life insurance agent about specialty short-term life insurance to cover loans.
Tip 9. Improve Your Health
One of the most important underwriting ways that all insurers rate you is based on the state of your health such as your weight, smoking, cholesterol, blood pressure and other health issues.
If you were in poor health when you bought a policy and improved or change your lifestyle, you could get re-evaluated by the insurer and get a better rating, which mean lower premiums.
Bottom Line – If your health has improved since you bought coverage, reapply to see if you can save money.
Tip 10. Buy Group Coverage If You Have Health Issues
We don’t normally recommend buying group coverage, especially if you are healthy, because there are many drawbacks to doing so. Employer life insurance isn’t portable, and doesn’t provide much in the way of death benefits.
These policies are also usually more expensive. But if you have health issues that would result in either very expensive premiums or even cause you to be denied a standard policy, joining a group coverage plan could be the way to go because you can’t be denied coverage and could save you money.
Bottom Line – Get group coverage if you have serious health issues.
Tip 11. Choose Annuity Payments Over Lump Sum
Most life insurance sites talk about getting death benefits paid as a lump sum. But there are other settlement options, such as getting the death benefits paid as an annuity. This means that the benefits are paid over a set period of time and in groups of time. By choosing to do so, your premium will be lower and you will save money.
Bottom Line – Choose an annuity payment than a lump sum.
Tip 12. Choose the Death Benefit “Sweet” Spot
You will see that many insurers advertise specific amounts of death benefits such as $100,000, $250,000, $500,000, etc. However, when calculating the death benefits you need, you might want to opt for some other amount – such as $450,000 for example.
This might not be the best thing to do because all insurers compete heavily for specific amounts of coverage. As a result, the premiums can be actually lower if you were choose a $500,000 policy over a $450,000 policy.
Bottom Line – Choose death benefits at the “sweet spots.”
Tip 13. Women Pay Less for Life Insurance
Most rates advertised tend to be for men which might dissuade many women from applying. The truth is, that women pay much less for the same amount of life insurance as a male (as much as 25%+ than what a male pays for the same amount of death benefits).
Bottom Line – Women save money on life insurance.
Tip 14. Reduce Your Drinking
That’s right, we said it. Life insurers will ask about your drinking habits and could penalize you if you exceed their minimal amounts. Simply by reducing your alcohol consumption, you can save money on your life insurance premium.
Bottom Line – Drink less alcohol.
Tip 15. Review Your Policy Every 3 Years
Life insurance needs change, so this is why you should review your policy every 3 years. You might not need the amount of death benefits that you thought you did. If you need or want to change your policy to a lower amount then that is an excellent way to save money that you don’t need to spend.
Bottom Line – Dust off the policy every 3 years and review your coverage.
Tip 16. Consider Your Payment Options
How you pay your life insurance premiums can also save you money. You will have to pay a higher premium if you pay monthly, because the insurer has to process the payment more frequently. However, if you opt for some other method such as quarterly, semi-annually or even better – annually, you will pay less on your premium.
Bottom Line – Pay your premiums annually instead of monthly.
Tip 17. Consider “Decreasing” Term Life Insurance
Most people buy “level” term life insurance, which means your death benefits remain the same for the duration of the term. But if you believe that your insurance needs will gradually diminish down the road, then consider buying a decreasing term where you death benefits are reduced in chunks of time, but your premiums remain the same. A $500,000 “decreasing term policy” would be cheaper than buying a “level term” policy.
Bottom Line – Decreasing term life insurance is cheaper than level term.
Tip 18. Change Your Driving Habits
Bad driving habits cost you money on your life insurance. The more moving violations you have accumulated, the more of a risk you are to be insured, so your premiums will be higher. The roads are risky enough, so why take unnecessary chances. Slow down, drive carefully and save money in the process!
Bottom Line – Slow down and drive more carefully.
Tip 19. Be Aware of Your Hobbies/Profession
Some people have jobs or hobbies which some insurers consider as “high risk”. Some insurers won’t even insure certain occupations or activities and will decline coverage. Fortunately, life insurers are not all the same. By talking to an independent agent, they will know which carriers are more lenient and can save you money by finding the best one for your job or occupation.
Bottom Line – Talk to an independent agent if you have a high risk occupation or hobby, because they can save you money.
Tip 20. Take the Medical Exam
While it’s not most people’s idea of a good time, taking the exam could save you quite a bit of money when applying for life insurance. When someone applies for a non-med life insurance policy, the insurer is agreeing to a higher risk by accepting your application without knowing your current medical status. With this added risk come a price – literally.
If you choose to take a medical exam, the company will see that you have nothing to hide, possibly resulting in a lower premium (depending on your health status).
Bottom Line – If you’re in decent to good health, take the medical exam. It could save you a few bucks each month.