One study carried out in 2020 found that 54% of people had some form of life insurance coverage. It also unearthed a problem. 41 million people admitted they needed covering but haven’t got round to finding a policy. That might be because it can be hard to find the right life insurance policy or understanding when the right time to take one out is. The truth is, there’s no right time to take out a life insurance policy.
Interestingly, many companies provide a life insurance policy, and if they didn’t, the 54% of people who have a policy would probably be much lower. Still, the insurance policies they offer aren’t always the most comprehensive. Whether you already have a policy or not, below, we will explore some of the ways you can save money on a life insurance policy.
Shop Around Online
The internet is a wonderful thing, and one thing it has enabled us to do well is shop online for the best deal. Many brands leverage exclusive online deals to draw customers in because they know that most people shop online now. What you’ll notice when you shop around is that there’s a huge difference between the cost of a policy even though they’re all offering the same type of coverage.
Shopping online using comparison websites can help you to see the difference clearly. Comparison websites can also help you see how policy prices differ depending on the amount of money you’d be willing to pay upfront if you needed to claim. Most experts say you should at least put $500.
Consider A Term Insurance Policy
A term policy means what it says – the policy covers you for a predetermined amount of time rather than extended periods. Naturally, insurers will charge you less because they know you only need to be covered for a shorter amount of time, meaning there’s less of a chance they’ll have to payout.
That might also be a time to consider multiple life insurance policies. Having more than one life insurance policy can help you save money in the long run because you’re maximizing your coverage for less, which some people call a ladder strategy. You might have a short-term and a long-term policy at the same time.
Buying Sooner Rather Than Later
It’s sensical that life insurance is cheaper the younger you are. The longer you wait, the more likely you are to pay a higher premium. You don’t necessarily need to wait until you have the responsibility of being a parent. Let’s put it into perspective.
The average premium for a $500,000 insurance policy lasting 20 years for a man who doesn’t smoke is $406 if the cover starts before the age of 50 and $1,461 if the cover starts over the age of 50.
The older we get, the more likely our lifestyle is damaging and that an insurance policy is likely to be used. Locking in those lower premiums from a young age, even at an age where life insurance can seem irrelevant, pays off in the long run.
Switching Insurers VS Loyalty
There’s an age-old debate about whether you should switch insurers or stay loyal, and the answer depends on the options available at the time. Realistically, unless you’re taking out short-term life insurance policies, you’re going to stay loyal to insurers throughout most of your life. Locking yourself into a 30-year contract will most likely mean you’re not going to change.
However, if you have a term contract, consider shopping around when it comes close to your policy’s expiration date. Many insurers offer new customer discounts that might trump the loyal customer discount that your current insurer offers. Or, you might find that your current insurer offers the best deal.
Look Out For Fractional Premiums
Fractional premiums can really catch you out, and it is the same for any insurance or contractual policy you take out that requires payment. Fractional premiums are the term used to describe when payment is made quarterly, or monthly. While it can seem appealing to pay a smaller amount over the year rather than one lump sum, this is what most insurers are hoping you will do.
They want to leverage your monthly payments by increasing the overall premium. It’s easy to see the difference between the total monthly payments and what it would be as a one-off payment. You’ll notice some insurers charge hundreds of dollars extra for the luxury of paying monthly, and others don’t. If you have to pay monthly, shop around to find an insurer that reduces any additional charge for not paying in one.
Consider Your Lifestyle
There’s one aspect of your lifestyle that all insurers are interested in, and that’s whether you smoke. One study found that a smoker is likely to pay a third more than a non-smoker, and a smoker over the age of 50 might pay up to two-thirds as much. It’s simple logic, the healthier you are and the better your lifestyle, the less risk you pose to insurers.
That’s why most insurance companies ask you to complete a medical examination before taking out a policy – and why experts recommend you take it. Taking a medical test can dramatically reduce your premium.
Life insurance doesn’t have to be complicated, but it is essential to take the time to shop around and find the best deal for you. There are plenty of self-help articles online like this one with excellent sources of information for guidance.