The number one reason why people don’t buy life insurance is that they think it’s too expensive. According to LIMRA, Americans overestimate the cost of life insurance by three times on average. Everyone likes to save a little money whenever they can. And while you can’t cut coupons for life insurance, here are nine things you can do to keep the cost down.
9 Ways to Save Money on Life Insurance
1. Buy term life insurance instead of permanent life insurance.
The biggest differences between term life insurance and permanent life insurance are how long their protection lasts and how much they cost. Permanent life insurance (also referred to as whole life insurance) is built to last your entire life and term life insurance covers you for a specific period of time. Permanent life insurance premiums cost about 10-15 times more than their term policy counterpart.
Most families only need term life insurance to protect their loved ones during their most financially-vulnerable years—the years they are raising children, paying mortgages, and putting money towards their retirement.
2. Purchase life insurance while you are young and healthy.
Life insurance companies are all about calculating risk. The cost of life insurance goes up as you age for two reasons: the older you are, the closer you are to dying. It’s just a fact. Also, as you age, there is a higher probability you’ll develop a medical condition that may affect your mortality risk.
How much risk are the insurance companies taking on when they insure you? If they deem it to be high, your premiums reflect this. Young, healthy people have the opportunity to lock in the lowest possible rates for life insurance coverage.
3. Don’t buy more than you need (but make sure you get enough).
There are several factors to think about when calculating how much coverage you need:
- Your age – Ideally, term life insurance will provide enough coverage to replace your income and be inforce (active) until you reach retirement. The closer you are to retirement, the shorter term you need and shorter term lengths cost less.
- The ages of your spouse and children – This is helpful in determining how many years of income replacement your family would need if you were to die. The closer your children are to being financially independent, the shorter term you will need. For example, someone with a toddler would typically need a longer term than someone whose child is in high school.
- Your income – Depending on where you are in your life, you may not need to replace your full income. An example would be if you are close to retiring and have significant retirement savings your family would benefit from.
- Your mortgage and debts – Make sure you have life insurance to cover outstanding debts.
- College expenses for your children – Do you have children that are planning on going to college? Life insurance can aid in tuition costs. However, if your children will be covering their own college tuition through scholarships and student loans then you do not need to calculate tuition into your coverage needs.
- End of life expenses (funeral costs) – Your family will be responsible for your funeral costs and wrapping up loose ends. But your funeral wishes can affect your life insurance coverage needs. For example, cremation costs less than a burial.
Here at Quotacy, we have an easy to use life insurance needs calculator to help you determine the right amount of coverage for you and start to save on life insurance.
See what you’d pay for life insurance
4. Don’t smoke.
It’s pretty simple. If you smoke cigarettes, you will pay more than your non-smoker friends. Smoking is bad for your health and by doing so you are a higher risk to the insurance companies. If you quit smoking, you can apply for a new life insurance policy and qualify for non-smoker rates after being tobacco-free for at least 12 months.
5. Lose weight.
Life insurance companies take your body mass index (BMI) into consideration when determining your premiums. Your BMI is calculated using your weight and height.
Because being overweight (a BMI of 25+) or obese (BMI of 30+) are often high-risk factors that can lead to many issues ranging from heart disease to diabetes, a person with an average BMI will statistically live longer than a person with an above-average BMI. This means that a person with a normal BMI will often have a lower overall term life insurance cost than a similar person with a higher BMI. While companies do consider your BMI, they don’t use it to set your final price. Life insurance companies each have their own guidelines for height and weight that they use to assign term life insurance rates based on underwriting statistics.
» Learn more: Height and Weight and Your Life Insurance Application
6. Keep your driving record clean.
Just like car insurance, your driving record can affect your life insurance rates. A few parking tickets won’t have as big of an impact on rates, but if you have a record of careless driving, speeding, or drunk driving you can expect to pay more.
7. Take the life insurance medical exam.
Depending on your age and how much life insurance coverage you want to purchase, you may have the option to skip the life insurance medical exam. However, in some cases, you can save money if you don’t mind going through the exam.
With a life insurance medical exam, insurance companies know they are getting the most up-to-date overall view of your health. Without an exam, the insurance companies don’t have the full picture of an applicant’s health so they make up this unknown risk by increasing the premiums for no-exam life insurance products.
8. Pay annually.
Some insurance companies offer payment options of monthly, quarterly, semi-annual or annual. If you opt to pay annually, you can expect to save money in the long run because it eliminates processing and administrative work for the company. And, it’s a bonus because you don’t have to remember to pay it as often.
9. Find the right life insurance company and policy for your needs.
Different insurance companies have different guidelines that they use to determine your premium. All life insurance companies look at age, health, and lifestyle factors (smoking, drinking, driving record, hobbies, etc) but they don’t evaluate all conditions and factors the same. Applying with the life insurance company that is the best fit with your risk factors can save you money each month.
Quotacy saves you time and money by finding the best life insurance company for you. When you apply for life insurance through Quotacy, you’ll be able to compare quotes across many top-rated companies instantly. After you submit your online life insurance application, your Quotacy agent will review it to make sure you’re matched with the best company. If there is a company that will treat your case more favorably than the company you chose when you applied, your agent will reach out and explain your options.
If you’re looking to save money on life insurance, apply today. Quotacy will help you find the right policy for your unique situation to ensure your loved ones are financially protected. Start by getting a term life insurance quote online (no contact information needed).
And if your quote is higher than you thought because of your weight, tobacco use, or driving record, we recommend you still secure the coverage and re-apply later if you plan on addressing whatever is causing your rate to be higher. Buying life insurance isn’t something you want to delay. Your costs increase as you get older. Health issues may creep in. Also, the longer you wait, the longer your loved ones go unprotected.
About the writer
Natasha Cornelius, CLU
Senior Editor and Licensed Life Insurance Expert
Natasha Cornelius, CLU, is a writer, editor, and life insurance researcher for Quotacy.com where her goal is to make life insurance more transparent and easier to understand. She has been in the life insurance industry since 2010 and has been writing about life insurance since 2014. Natasha earned her Chartered Life Underwriter designation in 2022. She is also co-host of Quotacy’s YouTube series. Connect with her on LinkedIn.