7 Ways to Lower Your Life Insurance Premiums

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Life insurance is one of those necessary evils in our lives. Much like all insurance products, many of us need it, but we want to pay as little as possible.

It’s also a great example of what I call “painless ways to save money.” If you can lower your life insurance premiums, it gives you an opportunity to reduce your monthly expenses without changing the way you live.

So today I’ve pulled together 7 ways you can pay less for life insurance.

First, take a good hard look at your finances and determine exactly how much life insurance you need. Consider the expenses your spouse or other dependents will be left with if you were to pass away unexpectedly. If you’re trying to cut costs, there’s no reason to buy more coverage than you really need.

Buying too much life insurance can significantly increase your costs. Take a look at these two examples of life insurance quotes:

Life Insurance Quote $1M

Life Insurance Quote $500K

As you can see, the higher the payout, the higher the premium. The key is to get the amount of life insurance you need, but no more.

Second, Apply the same principle to the term length of the coverage you purchase. If your mortgage will be paid off in five years, you may not need the same huge payout for a ten-year term. As you can see from the images above, the longer the term the more you pay.

Third, once you have a number in mind, you may find that you can save money by rounding up. Premium rates for certain levels of coverage often drop when you hit certain thresholds of coverage. Paradoxically, a $500,000 policy may cost less than a $490,000 policy.

Fourth, stop smoking and get in shape. When I purchased my term life insurance, I got 3 times the insurance as a friend of mine, but I paid less. He was overweight, and the result was much higher premiums. If you’ve lost weight since you bought life insurance, get new quotes to see if you can save some money.

Fifth, as you’re shopping for policies, make sure you check the hidden fees. Some insurers charge extra fees if you pay on a monthly basis rather than yearly. And insurance companies offer add-ons, called riders, that often offer additional coverage you don’t need. Here are a few examples–

  • Accidental Death Benefit: If the insured’s death is an accident, the payout is increased (often doubled).
  • Waiver of Premium Rider: If the insured becomes disabled, this rider will waive the payment of premiums. This is similar to an insurance policy that pays the mortgage if the homeowner loses his or her job or becomes disabled.
  • Disability income rider: With this rider, you’ll receive a certain amount of income should you become disabled.
  • Term conversion rider: Want to convert your term insurance policy into a whole or universal life policy? The term conversion rider gives you that option.
  • Accelerated death benefit rider: If you become terminally ill, you can collect some of your life insurance proceeds.

Generally, these riders are a lot like the “extras” car dealerships try to sell you. Most people don’t need them, and they aren’t worth the cost.

Sixth, stick with term life insurance. There are circumstances when whole or universal life policies are a good option, but for most people most of the time, term life insurance is best. And it’s a lot cheaper.

Finally, As with any product, you’ll want to shop around for the best bargain. Thankfully, most insurers make policy quotes available online. You can hop on the web and shop for a policy that suits your needs. As you’re shopping, make sure you’re comparing like policies with like terms. While one company might offer a policy with a lower premium for the same coverage, it may have exclusions that make the policy differ in important ways.

Published or Updated: October 7, 2012
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Comments

  1. This is a great review of saving money with life insurance. I feel that many people sadly have too little coverage when they should have more. But you certainly have to think things through and cannot just blindly choose a coverage amount and term length. You really need to think about your expenses and where you will be in 10-20 years. That way you can get the coverage you need without spending more than you should.

  2. Life insurance is important, we all know that. However, most of us doesn’t want to pay more than we should. It’s good to know that there are ways to lessen your life insurance payment. Thanks for sharing them here.

  3. david says:

    Thanks for your sharing here. very few people are there who will really think about life insurance. I think many individuals unfortunately have too little protection when they should have more. But you certainly have to think factors through and cannot just thoughtlessly select a protection quantity and phrase duration.

  4. david says:

    Thanks for your sharing here. very few people are there who will really think about life insurance. I think many individuals unfortunately have too little protection when they should have more. But you certainly have to think factors through and cannot just thoughtlessly select a protection quantity and phrase duration.

  5. Rob Drury says:

    Everything in this article is absolutely 100% correct; and at the same time, complete garbage. Why? Because, first, it implies that price is the most important issue, when in fact it is BY FAR the least. I do realize that the entire premise of the article was one of saving money, but while one is shaving pennies off his living expenses, he may be compromising his dependents’ financial futures. Quite often, the most expensive life insurance is the most cost effective in the long run. At age 30, I purchased a whole life policy for $100,000. Of course, I have much more coverage than this, but I wanted a small amount of permanent coverage for specific reasons. The policy has been in force for 21 years after paying premiums for only eight years, and will likely remain in force for the rest of my life or until I choose to sell the policy for 3-5 times the total premium paid.

    My point is not to sell the virtues of permanent insurance, but to highlight that life insurance, done properly, is not a stand-alone insurance product to be shopped as a commodity, but an integral part of a comprehensive financial plan that is intended to complement everything else in that plan. How much coverage one needs, the overall objectives of the coverage, and how the policies (likely, there will be a need for more than one type, term, etc.) are structured are decisions to be made only under the supervision of a qualifed financial planner or advisor.

    Rob Drury
    Executive Director,
    Association of Christian Financial Advisors

  6. Justice says:

    I would be very careful about disregarding some riders like Waiver of Premium in the event of disability. While it is true that the expense of the waiver is a little pricey compared to having a true Disability Income policy. The fact is most people do not have disability income protection, or it is sorely inadequate to their needs. Additionally, it is not uncommon for people to drop insurance coverage if a disability results in lost wages. Given that most causes of disabilities decrease life expectancy, having this rider increases peace of mind for the insured and his/her family.

  7. The primary drive in life insurance cost is your attained age at time of application. Since none of us get younger over time, replacing life insurance rarely saves money.

    The older we get, the closer we come to our inevitable end. Life insurance policies are priced to reflect this reality. The money saving tips may be helpful only for very new policies.

    Most states require agents to complete reams of paperwork anytime a life insurance policy is replaced. The intent is to discourage the practice.

  8. The primary drive in life insurance cost is your attained age at time of application. Since none of us get younger over time, replacing life insurance rarely saves money.

    The older we get, the closer we come to our inevitable end. Life insurance policies are priced to reflect this reality. The money saving tips may be helpful only for very new policies.

    Most states require agents to complete reams of paperwork anytime a life insurance policy is replaced. The intent is to discourage the practice.

  9. Alfred Mangum says:

    Every people wants to have insurance for future sake because we don’t know what happens in the next few days. But people preferred to have one that suit their needs and budget friendly as well. So, I rather search for a reliable insurance online and ask for an assistance from a certified agent maybe through it, I can have a cheaper insurance policy for me and for my family. Thanks for the tips!

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