Life insurance is one of the most important purchases you’ll ever make for your loved ones. At Quotacy, our purpose is saving families one life insurance policy at a time. We want to make life insurance easier to understand and easier to buy. Let’s discuss tips for affordable life insurance.
» Compare: Term life insurance quotes
Quotacy’s agents are salaried employees—not commission based. Their goal isn’t to sell you life insurance, but help you find the best policy that fits your needs and budget. In this article, we’ll provide some tips on finding an affordable life insurance policy.
1. Work with a Life Insurance Broker
There are hundreds of life insurance companies. And did you know that not all of them offer the same pricing? Some life insurance companies evaluate factors like health and lifestyle differently based on their experience with the particular risk.
A life insurance broker has access to multiple different life insurance companies whereas a captive life insurance agent can only sell policies from one particular insurance company. If you have a health or lifestyle factor that may increase your premiums at one insurance company, there is a chance a different insurance company may treat that factor more favorably. A good life insurance broker, like Quotacy, will shop your individual case around to find the insurance company that will be the best fit for you.
When you apply online through Quotacy, you choose what insurance company you want to apply to (if you’re not sure we just recommend picking the least expensive since we shop behind the scenes for you anyway) and once your application is submitted, this is when your agent goes to work for you.
Your dedicated Quotacy agent reviews your application to confirm that the company you chose will treat you the most favorably. Our agents will set realistic expectations upfront and work hard to get you the best rate possible by shopping around and advocating directly with the insurance company on your behalf.
2. Buy Term Life Insurance
Term life insurance is the least expensive type of affordable life insurance. And, honestly, it’s the best type of life insurance for most families anyway.
Term life insurance is temporary. It does not last your entire life like permanent life insurance does. For most people, the need for life insurance is short term. The cost for permanent life insurance will be about 10 times more expensive than term life insurance. For most people, the right move is to buy a term life insurance policy and invest the savings.
The main purpose of life insurance is to replace the income of a provider who dies unexpectedly. If you and your partner are raising children and one of you suddenly dies, what happens? Without life insurance, financial struggle is almost a guarantee.
Typically, term life insurance should last while you have dependents relying on you financially. The policy can then safely expire once you’re close to or in retirement. At this stage of your life, your dependents are grown and you have less debt. When you do die, ideally your surviving loved ones can use your savings to take care of your end-of-life expenses.
3. Buy Life Insurance as Soon as You Need It
The younger you are, the less you’ll pay for life insurance. Term life insurance has level premiums. This means that once your policy is inforce (active) your premiums will never change for the entire duration of the term.
|Sample Monthly Cost of a $250,000 30-Year Term Life Insurance Policy for Healthy, Non-Smoker|
Referring to the table above, if a healthy 32-year-old male purchased a $250,000 30-year term life insurance policy, he would only pay $13.44 per month for the entire duration of the policy (30 years). If he died unexpectedly at any point within those 30 years (a.k.a. before age 62), his family would receive $250,000 and premium payments would no longer be required.
The cost to buy an affordable life insurance policy increases with age. And if you develop any health conditions, this also increases the cost. This is why we advise you to buy life insurance as soon as you develop a need for it.
For most people, the right move is to buy a term life insurance policy and invest the savings.
4. Buy Life Insurance that Requires a Medical Exam
If you’re healthy, or even just average when it comes to health, buy life insurance that requires a medical exam. Buying no-exam life insurance will have higher premiums since the life insurance company takes on more risk by not requiring the applicant to get a medical exam done.
The life insurance medical exam is really quite simple. You schedule the time. You choose where the examiner meets you. You can even get the exam done right at your home or office.
Not only is the medical exam quick and convenient, you can request your results. Rather than spending out-of-pocket copays at your doctor to find out what your blood pressure, cholesterol, and glucose numbers are, get the results for free from your life insurance medical exam.
5. Ladder Life Insurance Policies
Laddering life insurance policies means that you own more than one policy at a time to cover the different financial responsibilities you have versus buying one large policy that covers them all. The reason to ladder life insurance is to save you money on premiums. You’re only paying for coverage when you need it.
» Calculate: Life insurance needs calculator
For example, let’s say you want life insurance to make sure your family can afford to keep living in your house even if you died. You also have young children and want to make sure there is enough money to provide adequately for them until they’re financially-independent adults. In addition, you also would like to help contribute to their college education costs.
All of these financial responsibilities and goals require a good amount of money. You could purchase one life insurance policy worth a million dollars or so that lasts a long time or you could buy multiple policies that expire when they are no longer needed.
Buying One Life Insurance Policy versus Laddering Life Insurance Policies
A young husband and father wants enough life insurance to enable his surviving spouse to cover the cost of his mortgage, raising three children and provide for their college tuition were he to die unexpectedly.
Annual Cost of Term Policies (without laddering)
Applicant: Male, 35 years old, healthy non-smoker
- Policy: 40-year term with a $1,000,000 coverage amount (covers mortgage, family, and college)
- Monthly Premium: $135.94
Yearly cost for the policy for each of the 40 years = $1631.28
Annual Cost of Term Policies (with laddering)
Applicant: Male, 35 years old, healthy non-smoker
- Policy #1: 30-year term with a $350,000 coverage amount (for the mortgage)
- Monthly Premium: $28.44
- Policy #2: 20-year term with a $500,000 coverage amount (for the family)
- Monthly Premium: $23.22
- Policy #3: 40-year term with a $150,000 coverage amount (for education)
- Monthly Premium: $27.73
Yearly cost for all three policies for years 1-20 = $952.68
Yearly cost for remaining two policies for years 21-30 = $674.04
Yearly cost for remaining policy for years 31-40 = $332.76
If our applicant were to outlive all of his policies, he would save a considerable amount over the 40 years if he laddered term life insurance policies versus buying one large policy.
6. Only Buy What You Can Afford
You want to do the best for your family—we get that. Your family receiving one million dollars in life insurance if you suddenly died would definitely help them get back on their feet, but are the premiums affordable long-term?
Everyone’s budget is different. If you’re looking to buy life insurance and are unsure that you can afford to keep the policy inforce, reduce the coverage amount. If you die, leaving your family a small amount of life insurance is better than nothing. Too often people buy life insurance with good intentions and then cancel it because they later on decide the premiums cost too much. At Quotacy, we always say a $100,000 life insurance policy is a million times better than nothing.
If you’re not sure how much life insurance you need, try out our life insurance calculator. Pop in a few numbers and it’ll calculate an estimate for you. This number is just an estimate and you can increase or decrease the number as needed for your individual situation.
About the writer
Writer, Editor, and Co-host of Quotacy's Q&A Fridays
Natasha is the content manager and editor for Quotacy. She has been in the life insurance industry since 2010 and has been making life insurance easier to understand with her writing since 2014. When not at work, she's probably studying and working toward her Chartered Life Underwriter (CLU) designation while throwing a tennis ball for her pitbull mix, Emmett, or curled up on her couch watching Netflix. If it’s football season, the Packers game will be on. Connect with her on LinkedIn.