Money Saving Tips

How to Save Money on Life Insurance

How to Save Money on Life Insurance
Written by Irina Vasilescu

If you’re the type who itemizes the things that you pay for on a monthly basis, you will see that a significant chunk of your earnings go towards insurance. Starting from car insurance to home insurance, health insurance to life insurance, these plans are paid for to make sure that you have the financial protection to back you up in case something unfortunate happens.

Change is the only thing constant, after all. And as morbid as it may sound, death is something that you also have to insure yourself and your loved ones against. In the following sections, we will be defining some terms related to life insurance. We will also be dishing out tips on how you can save money when paying for this type of insurance plan.

Terms Related to Life Insurance

Life insurance is something that you have to allot funds for, but you don’t have to pay an arm and a leg for it. Before giving out tips on how you can save money on this type of a life insurance plan, here is a quick look at some terms related to it:

Accidental Death Benefit

When you read through the Terms & Conditions of a life insurance plan, you might stumble upon terms like accidental death benefit. This means that if the insurer’s death is an accident, the payout will be increased. This payout is usually double the amount of the benefits received in case of natural death.

Accelerated Death Benefit Rider

For life insurance plan holders who are terminally ill, there could be a clause in your plan which refers to an accelerated death benefit rider. This means that you can collect a portion of your life insurance proceeds while you are still alive, to pay for any medical expenses.

Disability Income Rider

Instead of paying for a separate disability insurance plan, you can simply look for a life insurance plan with a disability income rider. This means that you can receive a certain amount of income in the event of a disability.

No Load/Low-Load life Insurance

This refers to an insurance plan which has fewer expenses built into it. There are no agent commissions, agent fees and other hidden fees that will inflate the amount of premiums that you are paying for. These are typically offered by financial advisers rather than insurance companies, and may not be available in some states.

Term Life Insurance

Simply known as term insurance, this is a type of financial plan where an insurer is required to pay a fixed amount of premium per month. The downside is that the insurance is only active within a certain span of time. Once it expires and you were unable to claim the benefits, you would have to renew the plan or be left with no life insurance at all.

Term Conversion Rider

This is an option that allows you to convert a term insurance policy into a whole or universal life policy. This is only possible when a term conversion rider is included in the clauses of the contract.

Universal Life Insurance

Think of this as a combination of a term life insurance policy and a savings account which earns interest over time. When buying a universal life insurance plan, you can have tax-deferred savings. If you’re enjoying a full, happy and long life, you would not have to pay the premiums at some point because of the tax-deferred savings. The plus point is that you still get to enjoy the security of having life insurance.

Whole Life Insurance

This is a type of a life insurance plan which is active for the entire duration of one’s life. It works in such a way that the money goes towards an investment fund. The rates typically stay the same for the first few years, then increase. As compared to other life insurance plans, whole life insurance may be a bit more expensive but its payouts are well worth it.

Ways to Save Money on Life Insurance

Now that you already have an idea about the basic terms related to life insurance, how can you save money when buying one? Getting a life insurance plan is very important.

If you’re single and taking care of an ailing parent or grandparent, what will happen to them in the event of your death? It becomes even more crucial to pay for life insurance if you’re just starting a family. Nobody knows when death will come knocking and if other people are relying on you for financial support, you would not want to leave them in the lurch.

But as mentioned earlier, there is no need for you to pay for life insurance plans with a fortune. With the following tips, you can save money on one of the most important insurance plans that you have to pay for:

Know which type of insurance plan is most suited for you

The general types of life insurance are whole, term and universal. How do you know which one is most suited for you? If you’re a working father whose wife and children are relying on you for income, which type of life insurance plan should you get? Check with your employer about the life insurance plan that you currently have.

If you think that its benefits will not be enough to support your family in the event of your death, consider paying for an outside plan. Universal insurance is probably best for those who are earning majority of the income in a household, because it serves as both a savings vehicle and a life insurance plan. Through it, your savings will accumulate over time – but you still have that protection of a life insurance plan.

On the other hand, elderly individuals or those who are unfortunately dealing with a terminal disease may want to consider whole insurance. This is in place for the entirety of your life. Its premiums are a bit higher than traditional life insurance plans but the payouts are better.

How long will the insurance plan be in place?

Next, determine how long the life insurance plan will be in place. There are plans which remain active for 5, 10, 15 or 20 years. In the event of the insurance plan holder’s death within these periods, the beneficiary shall receive the appropriate benefits.

However, in case you outlive the insurance plan, you are left without benefits to claim. This means that you have to renew the contract every time the timespan of the contract expires. The benefit of these kinds of insurance plan is that they are the cheapest to obtain.

Consider getting a convertible life insurance plan

How about a convertible or a renewable life insurance plan? If you only have a 5-year life insurance plan as part of your employer’s benefits package, for example, you can convert this into a more permanent type of a plan. This is also called a level-term convertible life insurance plan. When going for this type of plan, make sure to study the Terms & Conditions of the contract so you’d know what to expect.

Shop for no-load or low-load life insurance

No-load or low-load life insurance plans have already been defined in the previous section, but let’s try to learn more about it. The primary benefit of this type of an insurance plan is that you do not have to pay for agent’s fees or commissions. The problem is that not a lot of companies sell this type of policy. They can be bought directly through financial advisors.

Instead of charging you on a commission basis, they will simply add a flat fee to the plan. Some of the companies which sell no-load or low-load life insurance are TIAA-CREF (Teachers Insurance and Annuity Association of America) and the Ameritas Advisor Services. If this is available in your state, getting policies from them will save you a chunk of money.

Review your life insurance plans regularly

If you’re enjoying an otherwise healthy life, you might be tempted to cut back on your life insurance premiums but it is something that you should never be without. What you can do to cut back on the costs is to review your plans regularly. If you must, switch to a cheaper deal. Make a comparison of the life insurance plans offered by different providers, work out what you need and make an informed decision from there.

Don’t buy more life insurance cover than you need

A good rule of thumb to follow when purchasing life insurance is that its proceeds should amount anywhere from seven to ten times your salary. Employers usually offer life insurance plans which are only four times your monthly salary. What you can do in this case is to determine if your other insurance policies cover life insurance. These are called endowment policies which are linked to your other assets.

Get life insurance while you’re young!

Finally, make sure to buy life insurance while you’re young. Term life insurance, for instance, is generally offered at a cheaper rate to younger individuals who are in relatively good health. When you wait until you’re old and sick to get life insurance, your premiums could be astronomical.

With these tips, you can save a significant amount on life insurance premiums while still getting the protection that you need in the event of death.

About the author

Irina Vasilescu

Irina Vasilescu is our crafty designer. She joined the team three years ago and is also involved in the writing process.

7 Comments

  • These are great tips – especially to review it regularly. You never know when there will be an added expense or necessity that wasn’t previously available or needed. Good thinking!

  • I think the most important tip here is to start when you are young. It is great to have life insurance through your work, but in most cases that will not be portable and will not move with you from job to job.

    Since you will also want to have a plan you in addition to the one you may get as part of your employee benefits package, you really want to lock in the low rate you can get when you are young and healthy. Many times you can get that price guaranteed for as long as 30 years, and this will produce huge savings over time.

  • This is a really useful article! I’m still under 30, and never really thought about purchasing life insurance, but recently my partner and I have started to talk about how we really should go ahead and do it. Having all the definitions laid out in one place is so useful- I feel like it might as well be a foreign language when the life insurance agents are talking to you. It’s also nice to have an estimate of how much life insurance you should buy… I’ve suspected we were being oversold and I was right. Thanks for such an educational article!

  • I didn’t know that a convertible life insurance plan was an option. Having the finite plans such as the 5-year plan that you suggest is nice, but being able to convert that plan into another that is more equipped to meet your needs is always a good option to have. I definitely agree that you should study the terms and conditions so that you are not surprised by anything in the future, and so that you can make the convertible life insurance plan useful. Thanks for your insight!

  • Irina, just reading the article it seems like you sure know very well about life insurance. How old can you be to get life insurance or at what age does it really benefit the person? I’m about to turn 38 next month and so I’ve been wondering if I should wait or just go on and get the insurance.

  • As my husband and I grow older, we are looking to update our live insurance plans. By doing so, we hope to save money on our deductible. Above, you mentioned that we shouldn’t buy more insurance than we need. How do we figure out how much we will need? Would consulting with an insurance provider be helpful?

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