5 of the Biggest Money Saving Tips for Life Insurance
I have a big goal here on Debt Roundup. I try my best to show you many ways to save more of your money each and every day. I know my audience loves to save money, along with making more. This is what I do here and I’m glad I get to do it. Having said that, I know I’ve dropped the ball a bit when it comes to life insurance. I don’t cover the topic much and that’s because it’s not a subject I’m extremely familiar with. I do suggest everyone have life insurance, but how to save money while buying it isn’t my strong suite.
Luckily for you, I have friends in this field, so I’ve asked on to write about it. His name is Chris Huntley and he came through big time today. This is an epic article to show you how to save the most money when buying life insurance. In some cases, up to 70%! That’s huge if you ask me. So, if you’re in the market for life insurance, take a seat and read this one. You’ll be happy you did and so will your bank account!
Take it away Chris…
Every day, you see advertisements from life insurance agencies on TV or the radio claiming that they can save you 15%, 58%, or 70% on life insurance.
Is this some kind of a scam?
In fact, no! The right life independent insurance agency can actually save you a lot of money when it comes to buying life insurance.
An independent life insurance agent can save people as much as 50-70% or more on life insurance, by guiding consumers through the following 5 cost savings strategies.
Tip 1. Save 25% on Life Insurance by Losing 3 lbs
Life insurance companies set “underwriting guidelines” for various health issues such as height and weight, blood pressure level and cholesterol level, and they are very strict about only allowing people to qualify for the higher health classes unless you fall within their guidelines.
The simplest example of this is height and weight. Say you are 5’10 and weigh 194 lbs. But the company with the best price requires you to weigh a maximum of 192 lbs to qualify for their best rating.
It may be hard for you to believe that just a few measly pounds could mean the difference between you qualifying for a company’s best class, and their second best class, but it’s true. And there is typically a 25% premium increase for each health class. So yes, you could literally lose 3 lbs prior to your medical exam and save 25% on life insurance.
And you might find yourself in the same situation with blood pressure or cholesterol, perhaps just needing to slightly improve your lab levels to qualify for a better health class.
Obviously, you won’t know where these levels (or savings) are, so the key is to work with a knowledgeable, independent agent, who can find savings opportunities like this for you.
In some cases, you may not know your numbers. So for you, I’ll just say this. It’s incredible how quickly the body can respond to healthy eating and exercise. If you don’t already eat well and exercise, I highly recommend you make a conscious effort to do so for at least one week prior to your medical exam. It could save you 25% or more on life insurance.
Tip 2. Don’t Buy No-Medical Life Insurance If You Are Healthy (40-60% Savings)
No-medical exam life insurance policies are being heavily advertised these days because of the convenience of not having to take a medical exam which standard, “fully underwritten” policies require.
Don’t be fooled by these commercials because no-medical policies can easily cost as much as 3 times or more than what you would pay for a standard policy which requires a medical exam especially if you are and healthy.
Life insurance is a long term investment, so if you are young and healthy you might save hundreds or even thousands of dollars simply by getting a policy which requires a medical exam. Another thing to keep in mind is that the death benefits offered on no-medical exams are much lower, and you don’t want to be underinsured.
Tip 3. Buy Several Policies Also Known As “Layering” or “Staggering” (10-15% Savings)
Most people buy 1 large policy to cover several purposes, but this may not be necessary, and may be causing you to overpay for life insurance.
There are many reasons why people buy life insurance, but the majority of Americans use life insurance to cover:
- Income Replacement
- The Mortgage
- Children’s College Tuition
Life insurance can be used for different needs AND also for different time periods. For example, you might think you should opt for a $1 million policy to cover all 3 of the above.
At this point, most advisors would recommend their client purchase one policy for $1 million dollars with a 30 year level term.
But what happens if you pay down your mortgage or your children decide they don’t want to go to college? You’re stuck overpaying for a $1 million dollar, 30 year policy.
If you are diligently planning for your future, you could probably foresee some of the changes in life insurance needs you’ll face moving forward, and could save 10-15% by staggering or laddering your term life insurance maturities to accommodate your changing needs.
Take a $1 million coverage need, for example. By purchasing the same amount of coverage ($1 million), but instead of purchasing one policy, purchase two or three and ladder the term life insurance maturities.
You might purchase a 20 year policy with a $500,000 death benefit and a $500,000, 30 year term policy.
This way, you’ll have a $1 million of coverage for a full 20 years. At the end of 20 years, if you’ve been paying down your debt, and saving for retirement, as Grayson teaches, you probably won’t need $1 million of coverage. You can let the 20 year term policy fall off, and only continue paying on the other 30 year policy, leaving you with $500,000 for years 21-30 of your “life insurance plan.”
And since 20 year term costs less than 30 year term, you’ll save about 5-10% by laddering your term policies.
Ten and fifteen year terms cost even less than 20 year term, so even greater savings can be achieved if you use, for example, 10 and 30 year maturities instead of 20 and 30.
Tip 4. Choose Annuity Payments Over Lump Sum Death Benefits (10-30% Savings)
Most life insurance information you see today advertises that the death benefits will be paid as a lump sum. However, there are other settlement options that you can choose which will save money on your premiums.
The other option is to get the death benefits paid as an “annuity”. This means that the benefits are paid over a set period of time and in groups of time.
For example, say you make $75,000 per year, and would like to protect your spouse from the loss of your income upon your untimely death. You determine your spouse would need $60,000 per year for 15 years.
Again, in this case, many advisors would simply multiply $60,000 times 15 years and recommend a policy with a $900,000 death benefit. (Some agents also factor in future interest the money would earn and inflation, but you get the gist.)
But does your spouse really need a $900,000 lump sum to achieve your goals? You could set up the death benefit to pay out $60,000 over 15 years, and save about 15% off the cost of your insurance, achieving a very similar goal.
Please note that very few companies offer these pre-determined annuity elections, so be sure to speak to an independent agent who represents all of the best insurance companies, to be sure you find one with the annuity payment option.
Tip 5. Always Use and “Independent” Life Insurance Agent (50% Savings or More)
This is our most valuable tip that can save you “thousands” of dollars when buying life insurance. Not all life insurance agents are the same.
There are 2 types of life insurance agents you can use to buy life insurance:
- Captive Agents
- Independent Life Insurance Agents
Captive agents are held “captive” to the one company they work for and represent. Your options are very limited about the products offered.
For example, a good independent agent will know which company to apply to in order to get non tobacco rates for pipe smokers, or the companies who won’t penalize you for having a history of cancer in your family, or where to find a 30 year term for 57 years olds, (when most companies stop offering 30 year term at age 50 or 55.)
So let’s say you have a tough medical issue, such as diabetes. Some companies are much more lenient in underwriting life insurance for diabetics than others. You don’t want to get pigeon-holed into applying to a company that’s going to decline you or hit you with a substandard rating when other companies can offer better.
So again, it’s all about the independent agent. Because they have access to multiple companies and know which companies are more liberal for a host of health issues, they can save you 50% or more simply by applying to the right company.
(BONUS TIP) – Buy Life Insurance Now! Premiums Increase 5-12% Every Year You Wait
Regardless of whether you choose Term or a Permanent life insurance, ladder your maturities, or buy from an independent agent, one tip that holds true in every case is, the earlier you buy life insurance, the more you save.
From age 20 – 35 premiums are relatively the same, only increasing about 3-5% for each year you grow older, and become increasingly more expensive as you age.
After age 35, premiums increase on average 5-7% per year, but that’s not all. Now that you’re over 35, you are more likely to experience health issues such as an increase in blood pressure, higher cholesterol rates, and weight gain which can negatively impact how you are rated and cost you even more.
When you get into your 50’s, premiums increase about 8% for every year you wait, and over age 60, you’re looking at a 10-12% premium increase every year!
The general rule in life insurance is that you will likely never be as healthy as you are today, (and you certainly won’t ever be younger), so if you’ve been putting off buying life insurance, I would recommend getting a quote today, and starting the process.
Just be sure to use an independent agent!
Author Bio: Chris Huntley is president of Huntley Wealth & Insurance Services in San Diego. He also owns eLifeTools, a site dedicated to online marketing for insurance agents. He can be reached on Twitter @mrchrishuntley.