In considering life insurance to protect the ones you love, it is important to get the best rates possible.
However, finding cheap life insurance can sometimes be easier said than done for consumers navigating the complicated and ever-changing world of financial services.
These challenges are completely understandable given the complexity of different policy options and the overwhelming number of insurance companies in today’s marketplace. However, it is possible to save up to 70% on your life insurance by implementing a few simple strategies.
This article, Cheap Life Insurance: 13 Tips for Getting the Best Rates, provides specific and actionable recommendations for getting the life insurance coverage you need at the best rates possible.
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Cheap Life Insurance: Tips and Recommendations
The basic need for life insurance protection is a foundational part of many families’ financial and estate planning considerations.
Essentially, if someone depends upon your income for financial support, you likely have a need for some level of life insurance coverage.
However, ensuring that you get the best rates possible and/or most coverage for your money can often be difficult as well as somewhat frustrating.
Individuals shopping for life insurance routinely ask questions such as: What type of life insurance is the best? How much coverage do I really need? Or, which insurance company should I choose?
Consumers also frequently ask how to get cheap life insurance, or at least the best rates possible, based on their individual situation. In addressing these and other questions related to life insurance, first and foremost, it is important that you identify appropriate coverage needs and choose a highly rated insurance carrier. Beyond these basic strategies, there are also a handful of insider tips and recommendations for getting low-cost life insurance.
Tip #1 – Choose the Right Type of Life Insurance
In purchasing life insurance, the type of policy selected is an important consideration.
Is the need for coverage temporary or permanent in nature? Are you concerned with the accumulation of cash values and by association interest crediting, investment options, or other elements?
In many instances, the type of policy needed can be determined by the length of time the coverage will be required.
Quick Tip: Choose the “right” type of life insurance coverage. One of the best ways to purchase inexpensive life insurance is to select the shortest “term length” that will adequately meet coverage needs.
Term life insurance is routinely less expensive (initially at least) than permanent coverage given a similar face amount. Even among term plans, policies with shorter guaranteed periods generally cost less. As an example, a 10-year term plan would have lower rates than a 20-year term, and the 20-year term would be less expensive than a 30-year plan.
As an example, for relatively short needs such as coverage for a Small Business Administration loan (3 to 5 years), an annually renewable term policy may be a cost-effective option. While, for mortgage protection, a 15 or 30-year term may make sense depending on the amortization period. In reality, “cheap life insurance” is really a matter of consumer perspective.
One effective, but not so common strategy, is to “ladder” term insurance policies purchasing policies with different lengths to meet specific needs. The important thing is to get the type and length of coverage that you truly need at the best rates possible, whether that be cheap term life insurance, affordable universal life insurance, or other coverage.
The following sample rates provide an example of potential cost savings based on selecting shorter coverage periods (or terms).
Note: Sample rates provided are based on rate information at the time of publication and are subject to change without notice. Company underwriting makes the final decision concerning rate class and/or policy approval.
Tip #2 – Select an Appropriate Coverage Amount (Death Benefit)
The amount of coverage, or death benefit, for a life insurance policy is an extremely important consideration for families.
Though the primary reason for selecting the right amount of life insurance is to ensure adequate protection, it can also help in getting the best rates possible.
You obviously want to meet coverage requirements but also don’t want to purchase more insurance than is needed.
Quick Tip: Select an appropriate amount of coverage (no more, no less). Conducting a comprehensive needs analysis can help to determine an appropriate death benefit for your individual situation.
You may have heard that individuals should own life insurance equal to seven, eight, or even ten times their annual income. However, these “rules of thumb” are often flawed in that they do not take individual financial considerations into account.
According to Life Happens, life insurance needs essentially depend on two variables: “How much will be needed at death to meet immediate obligations? And, how much future income is needed to sustain the household?”
The best method of determining the appropriate amount of life insurance coverage is to conduct a comprehensive needs assessment. This process involves identifying immediate cash needs, income replacement, debt requirements, educational funds, and other needs, and considering continuing income, current assets, and other resources available to offset life insurance requirements.
If income replacement is a primary concern, there are innovative policy options providing guaranteed future income as opposed to a lump sum death benefit which can save you significant money on premiums. Or, if you have an existing life insurance policy and your coverage needs have decreased, some insurance companies will consider a request to reduce coverage, thereby lowering policy premiums. Also, there are routinely price breaks, or “bands,” at certain coverage levels, which can lower rates per unit of coverage.
Tip #3 – Choose the Best Insurance Company for “YOU”
In considering the purchase of life insurance, another important variable is the actual life insurance company that you select for coverage.
This decision can cause significant confusion given the overwhelming number of options available in the modern life insurance marketplace. And, it is fair to say that all insurance companies are not created equal.
According to the Insurance Information Institute, there are almost 6,000 different insurance companies doing business in the United States alone.
Quick Tip: Choose the “best” insurance company, in other words, the insurer that looks most favorably at your specific situation. It is important to consider how different companies evaluate your individual health and lifestyle considerations.
There is a reason why insurance ads often say that “comparing rates from multiple carriers can save you 70% on your life insurance” or “15 minutes can save you 50% on life insurance.”
In working with customers, we are often asked if there is potentially a cost difference based on the insurance company. And, the short answer is YES… The term “cheap life insurance” is relative based on the products and quality of the selected insurer.
Since each insurance company designs and prices individual products offered to consumers, it is possible to have significantly different pricing from one company to another. There are also variances in underwriting standards with some companies that can make a significant difference in rates for certain health considerations.
As an example, one insurer may consider an applicant taking high blood pressure medication for Preferred Plus (best) rates, while another may not. Or, Company A may consider a family history of cancer differently than Company B. It is also important to check the financial ratings for the insurance companies being considered.
Tip #4 – Lose a Few Pounds, Be Health Conscious
The general pricing for life insurance is based on age, gender, tobacco use, health, lifestyle, and other factors.
While some of these elements are beyond our control, others may be influenced to improve our “risk level” and, therefore premium rates. In addition to potentially lowering the rates on your life insurance, a few simple choices may also improve your health and quality of life overall.
Quick Tip: Lose a few pounds and be health-conscious. Even subtle improvements in an applicant’s weight, blood pressure readings, or cholesterol levels may help in qualifying for lower life insurance rates.
In comparing the different underwriting classifications offered by most insurance companies, the “cutoff” values from one category to another can be minor. In other words, relatively minor differences in an applicant’s weight, blood pressure, cholesterol readings, and other factors can affect premium rates.
As an example, with one well-known insurer, a male who is 6 feet tall weighing 231 pounds qualifies for a Preferred rate classification. However, if he weighs 232 pounds, a more expensive Standard Plus rate classification applies.
According to Healthline, it is possible to lose a few pounds quickly and responsibly through a handful of healthy diet and exercise habits.
The following chart shows hypothetical differences in underwriting based on height and weight considerations.
Tip #5 – Quit Smoking and/or Explain Tobacco Use
The use of tobacco products is a significant contributor to health concerns and associated healthcare costs.
According to the Centers for Disease Control and Prevention, almost 40 million adults in the United States smoke cigarettes, and annual medical costs for tobacco-related diseases run nearly $170 billion.
Quick Tip: Quit smoking and/or explain other types of tobacco use. Quitting cigarette use can improve life insurance rates after just one year and may even qualify an applicant for non-tobacco rates within five years. Also, smokeless tobacco users, the occasional cigar smoker, and others may be considered for non-tobacco rates with certain insurance companies.
Given the potential health and mortality risks associated with smoking, it makes sense that tobacco use would be a significant consideration for life insurance companies. In fact, cigarette smokers are often shocked to learn that life insurance premiums for tobacco users can be twice that of non-smokers. Even ex-smokers who quit within the past five years may still pay higher rates for the same coverage.
On the other hand, smokeless tobacco users and the occasional cigar smoker are often pleased to learn that some insurers will consider them for non-tobacco underwriting classifications. This designation as a “non-tobacco user” can significantly reduce premium rates, in many instances cutting the cost of coverage in half. Some prior smokers are surprised to learn how cheap life insurance can actually be as a non-tobacco user.
In considering tobacco versus non-tobacco underwriting, it is important to fully understand carrier requirements. As an example, in order to get preferred consideration, cigar smokers must normally disclose tobacco use on the original application and may or may not be allowed to have nicotine present in lab work depending on the insurance company.
Tip #6 – Take the Insurance Exam (Fully Underwritten Coverage)
In evaluating an application for coverage, life insurance companies routinely consider the general health and medical history of a proposed insured to assess general insurability.
This process often involves the applicant completing a basic “insurance exam,” as well as providing health and medical information.
Quick Tip: Take the life insurance exam to apply for fully underwritten coverage. If you are fairly healthy or have medical issues that require explanation, taking the examination allows the insurance company to have a complete picture of your current health.
These mini exams routinely take less than an hour and involve a series of medical questions, medication documentation, height/weight check, blood pressure reading, collection of blood and/or urine samples, and other tests. The insurance company may also request medical records or attending physician statements for any potential areas of concern.
The examination allows the insurance company to conduct a comprehensive evaluation of an applicant’s current health and medical history as part of the underwriting process. It is possible to get coverage without taking an exam through certain non-medical and/or simplified issue policies. However, the premium rates are routinely higher without an exam. Also, if you have less than perfect health, some “non-medical” policies will simply decline coverage.
The medical exam process allows you to provide the insurance company with a complete picture of your situation. It can also be beneficial to include a cover letter and/or physician’s statement to provide additional details which would be to your benefit. In preparation for your life insurance exam, it can be helpful to gather the required information and take steps to ensure the best results possible.
Preparing for Your Exam
- Make a list of current medications
- Have doctors contact information
- Schedule exam early in the morning
- Drink plenty of water prior to exam
- No caffeine or nicotine prior to exam
- No alcohol the day before exam
- Limit sodium and fat prior to exam
- Get plenty of rest the night before
- Be open and honest with examiner
Tip #7 – Buy Life Insurance While You Are Young
If you have a need for life insurance coverage, it makes sense to buy sooner rather than later.
Since age is one of the primary considerations in the pricing of life insurance, it stands to reason that those of us who are slightly more “seasoned” can expect to pay higher premiums.
It is also important to consider the increased chance of health issues as we age. These factors combined can significantly increase the cost of life insurance for a primary insured, often beyond the point of affordability.
Quick Tip: Buy life insurance while you are young to save significant money on premiums. The earlier you buy life insurance coverage, the better. You will not only qualify for lower premiums based on age but can also avoid higher premiums or possible uninsurability due to unexpected medical issues in the future.
Younger insurance shoppers are often pleasantly surprised at how cheap life insurance can be for the entire family. But even a one, three, or five-year delay can make a moderate difference in premium rates. As an example, premiums for a $500K 30-year term policy on a healthy male will run about $350 per year at age 30 but increase to around $425 per year at age 35. This may not sound like a significant increase, but when you consider the cost over the life of the policy, it can add up quickly. In the example above, our healthy male will pay over $2,000 more for his policy due to waiting five years. And this does not account for possible increases due to medical diagnoses and other unforeseen considerations.
The following sample rates provide an illustration of the impact of waiting to purchase life insurance, given a $500K 30-year term policy and a preferred plus underwriting class.
$500,000 30-year Term Life Policy Rates
Male Insured (Preferred Plus)
- 30-year-old male – $30.92 per month
- 40-year-old male – $50.52 per month
- 50-year-old male – $127.73 per month
Female Insured (Preferred Plus)
- 30-year-old female – $25.89 per month
- 40-year-old female – $41.39 per month
- 50-year-old female – $94.24 per month
Note: Sample rates provided are based on rate information at the time of publication and are subject to change without notice. Company underwriting makes the final decision concerning rate class and/or policy approval.
Tip #8 – Backdate Effective Policy Date to Save Age
In determining an applicant’s age, insurance companies may use either the proposed insured’s actual age (age on their last birthday) or nearest age (age closest on a specific date).
As an example, a 40-year-old born in January is closer to their 40th birthday until the end of June, but as of July, they are technically closer to their 41st birthday.
This can be somewhat confusing, but welcome to the world of insurance. However, many insurance companies will allow an insured to “backdate” the effective date of a newly issued policy to “save age” or have the premium rates based on their previous age. Though one year’s difference may be minimal for younger insureds and/or short-term policies, this difference in premium can really add up for older insureds over a long period of time.
Quick Tip: Consider whether backdating a new policy’s effective date to save age is in your best interest. Though it may cost a little more upfront to pay back-premiums, backdating a policy can potentially save you a significant amount of money over the long term.
So, if you are thinking this sounds too good to be true and that there has to be a catch, you would be correct. An insured who requests that a policy be backdated can usually only do so for a certain number of months, and they must also pay all premiums for the backdated period. Essentially, it is important for a policy owner to do the math to see if this strategy is worthwhile in their specific situation. In many instances, backdating can make sense for older insureds and/or larger life insurance policies.
As an example, a 60-year-old male qualifying for preferred plus underwriting on a $1,000,000 20-year term policy would pay around $387 per month. However, at an issue age of 61 years old, his premiums would increase to around $441 per month. This premium difference over the life of the policy would equate to almost $13,000. So, paying a couple of extra months' premiums upfront to “save age” could be a logical decision. It is important to discuss options with an experienced agent to make an informed decision related to policy dating.
Tip #9 – Pay Annually to Avoid Higher Monthly Premiums
The premium rates for life insurance policies are traditionally calculated based on annual premiums for a given policy year.
But since many consumers prefer to pay monthly or quarterly, the premiums are further broken down into periodic payment amounts.
However, the convenience of “monthly premiums” is not without added cost. Essentially, the insurance company is financing the annual policy premium allowing policy owners to make “easy monthly payments,” which often increases the total amount paid.
Quick Tip: Pay life insurance premiums annually to avoid higher periodic monthly rates. Forgoing the convenience of monthly life insurance premiums can save you money since the insurance company will not be “financing” the annual cost.
As an example, a 60-year-old male qualifying for preferred plus underwriting on a $1,000,000 guaranteed universal life (permanent) policy would pay around $1,481 per month. But if the policy owner agreed to pay annually, the premiums would run about $17,365 per year. This ability to pay premiums upfront each year could save the policy owner over $400 a year. Again, it is important to discuss premium options with your insurance professional to develop the best plan based on your individual situation.
Tip #10 – Ask About Multiple Policy Discounts
In situations when life insurance is purchased through an existing insurer, such as your auto or homeowner’s insurance carrier, make sure to ask about any multiple policy and/or multi-line discounts that are available.
These incentives are common among several of the major insurers offering various lines of coverage.
Insurance companies know that there is increased loyalty among consumers having multiple policies with the same insurer, and you can believe that they want your business.
According to The Balance, discounts can range from 15 to 25 percent depending on your particular insurance company and type of policies owned.
Quick Tip: Ask insurance companies that you currently do business with about multiple policy discounts. Information related to multi-policy benefits, in addition to independent life insurance quotes, can help in making an informed decision that best meets your needs.
In conducting a quick search, a number of reputable companies to include Allstate, Geico, Liberty Mutual, Nationwide, Progressive, and others, offer multi-policy savings. Though these discounts may not always apply to life insurance, it never hurts to ask, and sometimes the savings on other policies can help to offset life insurance costs.
As a side note, it is recommended that you do not limit yourself to existing insurance companies when shopping for life insurance. Getting comparable quotes from an experienced independent agent in addition to current insurers can help in making an informed decision.
Tip #11 – Consider Group Coverage (But Beware of Limitations)
A quick review of your employee benefits at work will often reveal at least some amount of life insurance coverage.
It is common for employers to provide a “base” of coverage, possibly linked to annual salary amount, and also offer options for purchasing additional life insurance at the employee’s expense.
This coverage can be extremely affordable and routinely does not require evidence of insurability up to certain policy limits. Given these benefits, group life insurance can be a blessing for those who are otherwise uninsurable due to health considerations.
According to the Bureau of Labor Statistics, employer sponsored group life insurance benefits are available to over 90% of full-time workers in the United States.
Quick Tip: Consider employer-sponsored group coverage when evaluating life insurance policy options. Group coverage routinely offers affordable premiums with no proof of insurability, but it is important to understand that coverage traditionally ends with employment.
However, it is important to be aware that group life insurance coverage routinely terminates with employment. So, if you no longer work for the company, you will likely lose your life insurance coverage along with other employee benefits.
For this reason, it is recommended that individuals purchase life insurance coverage separate from group benefits, essentially having “portable coverage.” Group life insurance can be a cost-effective way to quickly and easily get needed coverage, however, it is important to consider benefit limitations and restrictions.
Tip #12 – Take Advantage of Free Life Insurance Offers
In considering ways to save money on life insurance, it is hard to beat FREE or complementary coverage offered by some businesses.
There are a number of ways to essentially get no-cost life insurance through banks, financial institutions, and/or other organizations with which you already do business.
In many instances, institutions such as banks, credit unions, credit card companies, and others offer small amounts of coverage associated with accounts, products, or services.
Quick Tip: Take advantage of free life insurance offers through credit unions, credit card companies, and other institutions. It is important to be aware of any complementary and/or supplemental coverage options when evaluating overall insurance needs.
This coverage is routinely fairly minimal, but every little bit helps. For younger consumers with no dependents and/or limited financial obligations, free coverage offered through a credit union and a couple of credit card accounts may be adequate.
Also, there may be increased coverage amounts for accidental death, travel-related incidents, and other considerations. The main point is that it is important to understand the perks and benefits associated with products and services you already use.
Another valuable source of free life insurance for those who qualify is also available in the form of corporate social responsibility initiatives, such as the MassMutual LifeBridge Program.
According to MassMutual, “LifeBridge is a unique free life insurance program that helps children of income-eligible families pay for education expenses if their insured parent or guardian passes away during the term of the policy.”
To date, this program boasts over 14,000 inforce policies with $700 million in coverage supporting the educational goals of low-income families. For details and/or eligibility requirements, please visit the MassMutual website or review the LifeBridge Eligibility Flyer.
Tip #13 – Partner with an Experienced Independent Agent
The life insurance marketplace can be somewhat confusing as products, services, and companies continually evolve.
It can be extremely helpful to have the support of an advocate when shopping and applying for the life insurance coverage you need.
Independent agents routinely have access to a number of top-rated companies and may also have valuable experience in aligning client needs with appropriate solutions.
Quick Tip: Partner with an experienced independent agent to help in choosing the right type of policy, appropriate amount of coverage, and best life insurance company for your individual situation.
Independent life insurance agents, unlike “captive agents” who work with only one company, routinely have access to a wide variety of insurance carriers and products. This “independence” allows them to recommend the products and services that are in the best interest of their clients, as opposed to being limited to a single product provider.
According to the Insurance Information Institute, over 50% of all life insurance sold in the United States is produced through independent agents or brokers.
Additionally, their experience in working with multiple carriers often results in expertise related to company underwriting niches, processing trends, and other considerations that may benefit their clients. Working with an experienced independent agent can be extremely helpful in navigating the complicated landscape of the life insurance marketplace.
Need cheap life insurance, or at least the best rates possible?
James Shiver is the founder of ChoiceLifeQuote.com and a multi-state licensed independent life insurance agent serving the individual family and small-business markets. Dr. Shiver also serves as a university business professor, as well as being an Accredited Financial Counselor®.