Life insurance is a smart financial move, but do you know how to make it budget-friendly?
You have been thinking about investing in life insurance, but cannot stop worrying about the costs it might carry? You are not alone. Between premiums, management fees, and all sorts of extras, most people assume that life insurance is considerably expensive. But we have good news for you: the cost of life insurance can be cheaper than you think.
Considering that this will be one of the most important purchases in your life, getting informed and exploring all the possibilities that will help you save money is a must. Luckily, we did the research for you and gathered ten useful tricks that will empower you to find the insurance you and your family deserve, for a fair and comfortable price. Ready to take some notes?
Canadians generally apply for life insurance in their early-to-mid thirties, when they are getting married or about to have children. That’s a good thing. But it wouldn’t hurt to do it even sooner.
When it comes to buying life insurance, the younger, the better. As you get older, you have more chances of developing health problems (like diabetes or high cholesterol) that make insurance more expensive. In fact, if a severe medical condition arises, the application for coverage can even be declined.
While there are many factors that determine your premiums, age is one of the most critical components. Even if you are single and childless, investing in this type of plan can ensure a safer future for you and everyone involved in your life, at a much lower cost.
But there is more! If you opt for a permanent life insurance plan, you can also take advantage of the cash value component. As the cash value of your policy grows, you will be able to borrow against it. Needless to say, the younger you buy your permanent policy, the more time it will have to grow in value.
You don’t need us to tell you how important it is to cultivate and maintain a healthy lifestyle. It lowers your chances of developing severe health problems, such as high blood pressure or diabetes; makes you feel energetic, keeps you in good shape, and, most importantly, increases your life expectancy. But there is another excellent benefit of a healthy lifestyle that many people overlook: it can significantly lower your insurance premiums!
While applying for life insurance, most companies will ask you a series of medical and lifestyle questions that aim to help them determine how risky you are to insure. If you prove to be a healthy and active person (by, for instance, demonstrating that you exercise regularly and follow a healthy diet), the insurance company will conclude that you are not a risky applicant. As a result, you are very likely to pay cheaper life insurance premiums.
And here is a crucial detail most people forget about: mental health also counts. Those with a history of depression or anxiety disorders, usually have to pay higher premiums for their life insurance. This is a friendly reminder that, besides investing in your physical health, you must also take care of your mental well-being.
We know this might be hard for some people, but it is honestly one of the best ways to save on life insurance - and, of course, to get on the right path towards a healthy lifestyle.
The risks associated with smoking are well documented, increasing the chances of lung cancer, stroke, heart diseases, and numerous other conditions. Therefore, it is understandable why premiums are dramatically higher for long-term smokers when it comes to life insurance.
As statistics show, smokers can pay up to 2 or 3 times more for life insurance than non-smokers. For a 40-year-old non-smoker male, for example, $1,000,000 in coverage for 20 years would correspond to a premium of $90-100/month. For a smoker, the same product could cost as much as $250/month. That is a significant difference.
If you are a smoker, quitting nicotine for good is one of the best things you can do to apply for lower premiums. But beware that, to qualify as a non-smoker, you have to quit smoking for at least 12 months before applying for life insurance.
And here is our final advice: no matter the circumstances, never lie about your smoking status on your life insurance application to pay cheaper life insurance premiums. Doing so is considered fraud and can have severe consequences and void your policy.
If you want to get insured while saving as much money as possible, a term life insurance plan might be the right choice for you. These plans, which usually cover 10, 20, or 30 years, are designed to support your dependents if you die prematurely, whereas permanent life insurance aims to provide protection for your entire lifetime. As a result, premiums on term insurance are generally much lower.
Still, there is a catch: term insurance premiums increase when you renew your policy (unless you have renewal guarantees), whereas permanent insurance premiums usually stay the same throughout your life.
In the end, it all comes down to your personal needs and circumstances. If your insurance needs are only temporary (because you recently bought a house, invested in a new business, sent your kid to college, and so on), a term life insurance is likely to be enough.
If you change your mind regarding the length of your policy, most insurance companies offer you the possibility of converting your term life insurance to permanent life insurance. Just keep in mind that it has to be done by a certain age, usually between 65 and 70
This is not the option that offers you the most savings on the list. Still, it is worth considering, and here is why: with life insurance, contrary to popular belief, the monthly premium is rarely the annual premium divided by 12. Instead, the annual premium is often multiplied by 0.09, which means that, on average, you pay 7% to 9% more just for the convenience of making monthly payments.
We know this gives a better sense of control, but if you have the cash on hand, consider paying your premiums on an annual basis. The big drawback of this tip is that the bill may arrive at an inopportune moment, coinciding with a time of many unexpected expenses. In any case, don’t worry too much about getting your payment frequency wrong. You usually have the option of switching between annual and monthly (or even quarterly or semi-annually) on your policy anniversary.
How much money will your dependents need to maintain their lifestyle if something unexpected happens to you? This is the question that mainly determines how much insurance you need.
No one will complain about receiving a higher benefit, but keep in mind that, if you want to guarantee a bigger payout when you die, you will have to pay higher premiums while you are alive.
Determining how much coverage you need can be quite tricky. Industry experts suggest that people should apply for a life insurance policy that covers about ten times their yearly income. But every case is unique, and so is every budget. If you don’t know how much insurance your loved ones will need to maintain their lifestyle, you can freely use our calculator to have an estimation. In less than two minutes, you will have a realistic idea of the coverage you will need to protect the people you love.
Life insurance usually comes with many add-ons that offer extra coverage or even ways for you to access the money from your death benefit while you are still alive. However, if you want to save money, you can simply refuse any unnecessary rider. Chronic illness rider, long-term care insurance rider, disability income rider, child term rider… each of these add-ons increases your premium, which you can avoid by opting for just the basic benefit of a plan.
Don't worry about regretting this decision. If you eventually face a significant life change, you can always re-examine your policy and add the riders best suited for you and your family.
In fact, you should review your policy and coverage every year, since new discounts and extras could apply to your new circumstances.
Even if you bought your life insurance plan years ago, there are still ways for you to save money. Nowadays, most life insurance companies let you decrease your coverage at least once during the policy's life. They understand that as you approach retirement and your debts get paid off, your insurance needs usually decrease.
For instance, if your mortgage is nearly paid and if your kids are now financially independent adults, maybe there is no reason to keep a significant coverage amount.
Nonetheless, it is essential that you give a lot of thought to this decision and carefully recalculate your insurance needs. If you decide to increase it back, later on, you will have to go through underwriting again, and the rates will be higher because of your age.
Here is another tip for current policy-holders. If you have made some significant lifestyle changes, you may be eligible for lower rates under a process called reconsideration. Suppose you’ve had an active policy for a year or two. This process enables you to ask your insurer to review your updated medical records and exam results to lower your insurance premiums.
If you managed to reduce your blood pressure or cholesterol, lose weight, quit smoking, or engage in a healthier lifestyle and diet, this option might be worth considering.
Just keep in mind that, to prove your new circumstances, you will likely be asked to provide at least one year of progression in your health records, and take another medical exam.
This process usually comes with associated costs, but, if your insurance company offers you the possibility of applying for it, it can be a great way of getting lower rates.
Last but not least, don’t procrastinate and don’t make impulsive decisions. Finding the right life insurance takes time, but it truly is worth the trouble, especially if you want to find a competitive solution. Nowadays, premiums can vary widely among companies, even for the same coverage amount. Depending on your health status, age, weight, occupation, gender, and hobbies, the values can be quite different, which is why it is immensely important to shop around before compromising.
Start by comparing the three main types of life insurance (term, whole life, and universal), and how they can address your specific needs and circumstances. Then, compare as many quotes and products as possible, until you find the one that makes you feel more comfortable, both in your heart and wallet. After all, if you are going to invest thousands of dollars over the policy's life, the least you can do is guarantee that the product you buy is right for you and your loved ones.
Now that you know how to save money on your life insurance plan, let’s get you and your family protected! If you have a spouse, children, or anyone dependent on you financially, having life insurance is a must for guaranteeing their financial security. Remember: life can be beautiful, but it can also be unpredictable, and there is nothing like being prepared for all eventualities.
If you want to find the best plan for your needs, please fill out a quote request and let our gentle advisors get in touch with you. We at TermLite will be more than happy to walk you through all your options and help you make the right decision.
Written by Diane Taes