Key Takeaways
- You can make life insurance more affordable by shopping around to find the best price for what you need.
- The younger and healthier you are, the more affordable your insurance will be, so getting started early and making healthy choices can help you afford coverage.
- Some insurers will give you a discount on premiums if you pay annually or bundle insurance policies.
- You can ladder policies or reassess your policy periodically to make sure you don’t pay for more coverage than you need.
Shop Around for Affordable Life Insurance
An easy way to make life insurance more affordable is to investigate all your options. Life insurance is a long-term commitment, so you should shop around for the best bargain. Compare quotes from multiple life insurance companies before deciding on what works best for you.
5 Steps for Shopping for the Best Life Insurance Rate
- Pick the policy type that’s best for you: term or permanent life insurance.
- Determine your amount of coverage. Make sure it’s enough to cover your beneficiaries’ needs.
- Compare different insurance companies’ underwriting and approval process, and consider how your health conditions and history may affect your approval chances or rates.
- Compare payment schedules. You may get a discount for paying quarterly or annual premiums instead of monthly payments.
- Check rider options. These add-ons will typically cost you more but can give you flexibility in your coverage options that may be a better fit than the basic policy you’re considering.
Also compare the companies’ history and financial soundness. Rely on independent insurance rating firms, such as A.M. Best, Fitch, Standard & Poor’s, Moody’s or Kroll Bond rating, to gauge the financial health of the insurance companies you’re considering.
Whatever you choose, the sooner you choose to buy your life insurance policy, the cheaper it will likely be. It’s much less expensive to buy life insurance when you are younger. The insurance rates you pay are based on your life expectancy — so your age is a major factor in their cost.
On average, premiums tend to rise by about 10% for every year you age. However, that’s on average. As you get older, you have a lower life expectancy, so the price starts rising faster and faster every year you wait.
To find the best policy for you and your family, research and comparison is a necessary step. Although it may take longer, speaking with multiple companies and representatives about their company’s benefits will help you understand whether a given policy will meet your needs. If you need additional help, hiring a licensed broker to work on your behalf can make the process less stressful.
Stephen Kates, CFP®Principal Financial Analyst for Annuity.orgStephen Kates, CFP® is a personal finance expert specializing in financial planning and education. He serves as the Principal Financial Analyst for Annuity.org, where he delves into industry trends to support consumers and financial advisors on wealth management, annuities, retirement planning, and investing.
Consider Affordable Life Insurance Policy Options
Your insurer may offer a few policy options that come with a discount on your life insurance premiums.
For example, a provider might allow you to “bundle” your life insurance policy with other types of insurance, such as home or auto insurance. By purchasing multiple policies from the same company, you can qualify for a multi-product discount that makes coverage cheaper. However, note that state laws regulate how insurance companies offer multi-product discounts, and the discount may not apply to all products a company sells.
When the time comes to pay premiums on your life insurance, your provider may give you the option to pay a larger sum annually as opposed to smaller premiums each month. This can cut down on the administrative fees a policy might charge each time you make a payment.
If you can afford it, paying annually is usually the more cost-effective option. Think of it like buying a product in bulk versus purchasing individual packages.
Use Laddering To Get More Coverage for Less
Laddering life insurance refers to purchasing multiple policies at the same time that anticipate how your obligations change over the course of your life. For example, obligations like childcare and a mortgage will eventually expire as your kids grow up and you pay off your house.
Other Common Changing Obligations
- Future education costs (college)
- Retirement plans
- Student loans or other debt
- Final expenses
Once these obligations are fulfilled, you no longer need to cover their costs. You can stagger insurance policies with different terms to align their expiration with when the coverage is no longer necessary.
Life Insurance Laddering Example
Let’s look at an example of how to do laddering life insurance policies. Suppose you purchase three policies.
Example: Laddering Policies
- $250,000 10-year term policy to cover your student loan debts and childcare
- $250,000 20-year term policy to cover college costs for children
- $250,000 30-year term policy to cover your mortgage and income for your spouse if you die
You start out with $750,000 coverage. After 10 years, coverage drops to $500,000 — but you have fewer financial obligations. You’re also paying less for coverage. There’s another step down on the ladder when the 20-year term policy expires.
This can be cheaper than buying a 30-year term life policy with $750,000 in coverage outright or starting with new term life policies every 10 years.
Maintain a Healthy Lifestyle
Insurers that offer various healthy living discounts claim they can save you as much as 25% on your life insurance premiums. Some insurers offer specific discounts to people who keep active, eat well and practice an overall healthy lifestyle.
Healthy Lifestyle Habits for Discounted Life Insurance
- Avoiding a risky lifestyle — maintaining a safe driving record, not engaging in high-risk activities or occupations
- Eating healthy
- Losing weight
- Not smoking (whether you quit or never smoked)
- Staying active or physically fit
Your current health conditions when you buy life insurance — along with your personal and family medical histories — play a major role in how much you will have to pay for life insurance.
Living a healthy lifestyle is associated with lower risks for heart disease, Type 2 diabetes and early death. Because premiums are based on mortality rates and life expectancy, having a healthy lifestyle may make buying a policy less expensive.
Reassess Your Coverage Over Time
Your life insurance needs will change over time, so it’s important to reassess your coverage to make sure it keeps up with changes in your life.
You should reconsider whether you have the right amount of coverage following major changes in your life and adjust your coverage accordingly.
When To Reassess Your Coverage
- When you get married
- Whenever you have a new child
- Buying a new home and having a new mortgage
- Sudden changes in your health
- Taking on a new debt
- Nearing retirement
Some financial professionals recommend you reassess your life insurance coverage every year to keep it aligned with your changing financial situation. Others recommend doing it every three to five years.
Because rates rise as you get older, reassessing your insurance needs sooner rather than later can save you money on premiums if you do need to make changes.
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