Buying life insurance is important for protecting your family. But just like when you binge shop on Amazon, it's easy to spend much more money than you need to. Here are a few tips on how to save money on life insurance and still getting the coverage you need:
Buy term life insurance
Term life insurance is designed to support your dependents if you die prematurely. In other words, if you kick the bucket within the term specified on your policy (usually 10, 20, or 30 years), your insurance company will pay your beneficiaries a certain amount of money, which is known as your death benefit.
Why do we think term insurance is enough? As you get older, your family's future expenses typically decrease. For example, your mortgage gets paid off (finally!) and your kids become independent. (Yes, it really will happen one day.) As these expenses drop, your life insurance needs begin to decrease too. This usually happens around retirement. But if you're ahead of the game in saving for retirement, it may happen even earlier.
Permanent insurance (insurance that covers you for the rest of your life) can be 4x to 5x more expensive than term insurance. But if your insurance needs are only temporary, why would you want to pay for permanent coverage?
Get the right amount of coverage
"Overprotection" is a tricky topic. After all, let's be honest here: no family is going to complain about receiving too much money from an insurance company if their loved one dies.
However, if you want a bigger payout when you die, then you'll have to pay higher premiums while you're alive. (After all, we're talking about insurance, not the lottery.) And if you live past your retirement age, overprotecting will significantly affect the lifestyle your family can afford.
Get the right advice to make sure you aren't overprotecting yourself and your family. Before buying insurance, think long and hard about the expenses you'd be able to afford if you were still alive. Consider how your family depends on you financially and how they would adjust if you died.
Pick the right term length
Life insurance renewals are expensive, which is why you should avoid them like the plague. How do you do this? Buy a policy with a term length that covers you for only as long as you need it.
This doesn't mean you need to buy life insurance for the longest period available (which could be expensive and completely unnecessary). But you should make sure that by the time your policy expires, you have enough money saved up to cover your family's needs if anything were to happen to you.
If you've ever looked at life insurance prices, you'll know that premiums can vary widely among companies even for the same coverage. This is usually because some companies have higher costs than others for a certain policy or age group. It can be easy to fall into the trap of thinking that a cheaper price means that you're looking at a cheaper product.
With life insurance, that isn't the case. There are a lot of expenses that are baked into your life insurance premium, like commission and office fees for your provider. A cheaper option likely means the company has created a more efficient process and is able to pass down the savings.
Take PolicyMe for example. By digitizing the buying process, we are able to pass down savings on premiums to people getting coverage! Check out how the pricing compares between life insurance providers.
Procrastinating didn't work in high school, and it won't work when it comes to purchasing life insurance either. Whether you're buying your first home, getting married, or thinking about having children, buying life insurance as a young adult can be a cost-effective way to plan for your financial future.
Each day that you don't have protection, you run the risk of getting sick. And any health conditions you develop later in life, like high blood pressure or sleep apnea, will only lead to astronomically higher rates (remember when we talked about the factors that affect life insurance pricing?)
So holding off on buying life insurance could seriously cost you (literally!).