20 Aug How to save money when buying life insurance
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:
1. 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? Learn more about why term life insurance makes sense for most people here.
2. 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 is able to 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. Better yet, complete our free life insurance checkup to figure out how much coverage you need without overprotecting yourself.
3. Pick the right term length
Life insurance renewals are expensive (more about that here), 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.
Sound complicated to figure out? At PolicyMe, we take care of the heavy lifting for you. We do this by projecting your coverage needs into the future based on your current income and expenses. We then use this information to predict which term length suits you best (usually 10, 20, or 30 years) while making sure that your family won’t be underprotected once your policy expires.
4. Compare prices
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. But in most cases, a cheaper price just means that for your product, one insurance company is pricing the policy more aggressively than another to “win the sale.” The good news is that this works in your favour! Just like you shop around for the best prices on flights and hotel accommodations, take advantage of competitive pricing for life insurance policies to get the best deal.
5. Don’t procrastinate
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!).
Save money on life insurance: Protect yourself without breaking the bank
Now that you know how to save money on life insurance, let’s get you protected. Not sure how much coverage you need? We can help with that. Complete our free life insurance checkup to figure out how much life insurance you need to protect the ones you love.