“As certain as death and taxes” is an expression that highlights the sureness of death and having to pay your dues. Just like all the other uncertainties in life, you will never know when something unfortunate might happen so you need to prepare for such eventualities.
As morbid as it may seem, this is where plans like life insurance proves to be handy. With a life insurance plan, you can rest assured that those you will leave behind in the event of your death will have the financial protection they need.
In the next sections, we will take a look at the basics of what life insurance is, whether you need one or not, and how you can save money on life insurance premiums.
Do I Really Need Life Insurance? The Benefits of Getting One
First, how can you determine if you need a life insurance plan? And what are the benefits of getting one if you figure out that it will do you a world of good to have one?
Simply put, a life insurance policy is a contract between an individual and an insurance company. The insurer pays a certain premium as monthly payments while the plan is still active; and the insurance provider will give what is usually a lump-sum payment or a death benefit to the beneficiaries of the insurer.
Depending on your individual needs and financial circumstances, there are different kinds of life insurance plans that you can sign up for, including the following:
Term Life Insurance
One of the most common types of life insurance plans is term life insurance. For this, a specific period of time is set for the effectiveness of the plan.
For instance, you can sign up for a life insurance plan with a time frame of 10 or 20 years. Once the effective period expires, you do have the option to sign up for continued coverage, although the premiums could be a bit higher.
However, as compared to the other types of life insurance plans, this is probably the cheapest.
Universal Life Insurance
This is a type of life insurance which provides lifetime coverage. Unlike term life insurance which has a lifespan of only one or two decades, universal life insurance is more flexible. It has a tax-deferred savings component which benefits you in such a way that you can use it to build wealth over time. Another difference that universal life insurance has over term life insurance is the higher premiums involved.
Whole Life Insurance
You can also sign up for whole life insurance which, as the name implies, offers a whole lifetime of financial coverage. As compared to term life insurance, while life insurance has a higher coverage. It can also be used to accumulate savings which are tax-deferred and if you have a lot of people depending on you for financial support, this helps preserve the wealth that you plan to transfer to them in the event of your death.
After learning about the different types of life insurance, let us determine whether it is something that you need to invest in or not. Basically, life insurance offers your lenders that assurance that your debts will be paid off in the event of your death. This includes your mortgage, credit card bills, etc.
If you’re a dad who has a non-working spouse and three kids, you should definitely get life insurance. If you’re a single woman who has an ailing, elderly parent who relies on you for financial support, you might also want to invest in life insurance. But if you’re single with nobody who is financially dependent on you, getting a life insurance plan might not be worth it at all.
If you do decide that life insurance is something that you need to invest on, make sure to check on what’s included with your employee benefits. Most companies provide generous financial death-in-service benefits – anywhere from three to seven times your annual salary. If you are under the company’s employment in the event of your death and the benefits are quite generous, there is no need for you to pay for a separate life insurance plan.
How to Save Money on Life Insurance Premiums
Next, how can you save money on life insurance premiums? It all depends on the type of insurance plan that you will be investing on. Before signing up for one, make sure that you are aware of what the Terms and Conditions are. There are pros and cons to getting term life, whole or universal life insurance. Again, it pays to check on what your employer has to offer in terms of death benefits before signing up for a plan.
Check out the individual ways by which you can save money on life insurance plans, no matter which type you end up signing up for:
Do your research about the insurance provider that you will be signing up with.
If you have kids who are under 18, a life insurance plan is one of the most crucial investments that you should have. At the same time, you’d want to sign up with a financially sound company that will give those who you will possibly leave behind the financial benefits that they deserve. So how can you ensure this? Do your research.
There are dozens of companies offering life insurance plans, so rank them according to real user reviews and ratings. There are also independent agencies which rate the cost, comprehensiveness, features and reliability of the providers offering life insurance plans. Narrow down your list to two or three, and make a final choice from there.
Make a comparison of the rates, and the pros and cons of each kind of plan.
When you go online, there are life insurance premium calculators that you can use to compare the cost of the different types of plans available.
If you want term life insurance, for example, would company A, B or C give you the lowest premiums? You can also ask an agent or a broker to give you an estimate of the premium amount that you are expected to pay. Just make sure that you will not work with agents who charge a commission, otherwise you might be tempted to sign up for a plan with a higher premium than what you actually need. Take full charge of your own health.
Consider the possibility of getting group life insurance.
If a life insurance plan is not part of your benefits an employee, you can still ask your Human Resource manager if you can make your own contributions for a policy. Most providers offer group discounts for different types of insurance policy, and this is something that is definitely worth looking into. You can even enjoy the convenience of having the premium amount deducted from your monthly salary, a benefit which you can enjoy along with the discount.
Know which age to get life insurance.
When asking about life insurance, the provider will usually base your premium on your age. If you’re 53 years old, for example, and you are about to celebrate your next birthday in three months, the provider will charge you for premiums qualified for a 54-year-old person. By paying back premiums for the past six months, you can save a significant amount of money for your annual life insurance premiums.
Don’t buy more than what you actually need.
There is no exact science to determining how much life insurance you actually need. It all depends on what you’d like to leave behind in the event of your death. Do you want your kids and spouse to not have any financial problems after you leave this Earth? Or do you simply want your relatives to have enough funds to pay for your funeral?
You should also consider the Social Security survivor benefits that your immediate family will get. After making a few quick calculations, consider the work-related policies and the Social Security benefits that you will get so that you can cover the remaining amount with life insurance premiums.
Review your life insurance policy annually.
Just like all your other insurance plans, you will save a lot of money by reviewing your life insurance policy annually. The only exception is when you go for a 10- or 20-year term life insurance. There are plenty of other insurance providers out there so you can easily make the switch, but you still need to check on the benefits that you will receive and the premium amount that you would have to pay.
Other tips to save on life insurance.
When buying a life insurance plan, stay away from agents who earn on a commission basis because they will always tempt you to buy more than what you actually need.
It’s also a good idea to live a healthier lifestyle while shopping for a life insurance plan because it will significantly lower your premiums. Quitting smoking and drinking, losing weight, eating right and exercising are the things that you can do in order to lower your life insurance premium rates.
Nobody wants to face the reality of eventual death but it is something that you need to be financially prepared for. By knowing how to save money on life insurance plans, you can rest assured that those who you will eventually leave behind will not run into any problems.