Want cheap life insurance? Consider these strategies
Updated October 16, 2024, 2:39 AM EDT
For Americans that don’t have life insurance, you could be leaving your loved ones and dependents in a bad financial situation if you pass away unexpectedly.
The 2020 Insurance Barometer Study found that 65% of Americans said the reason they do not own life insurance is that it’s too expensive. The average cost of a term life insurance policy is close to $160 per year. However, over half the population seems to think that term life insurance is over three times as expensive.
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How to get a cheap life insurance policy
Life insurance doesn’t have to be costly. These are some of the ways that you can get a cheaper life insurance policy:
- Get term life insurance
- Shop and compare life insurance quotes
- Buy as early as you can
- Build a life insurance ladder
- Avoid simplified issue life insurance
1. Get term life insurance
When you’re shopping for life insurance, you may notice that you have two options: permanent life insurance and term life insurance.
Term life insurance is more short-term. You choose a specific amount of insurance coverage and the policy is active for a set period, usually five to 30 years. Once it expires, you have to renew.
Insurance premiums for this are typically cheaper and the price depends on your age, health and the amount of coverage.
2. Shop and compare life insurance quotes
When shopping for life insurance, don’t stop at the first quote. The insurance rates online are often the lowest available but it doesn’t mean you’ll qualify for that rate.
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3. Buy as early as you can
Your age and your health are two big determining factors in whether you’ll be quoted cheaper life insurance rates.
If you’re younger and in good health, you’ll pay less for coverage. Most people in their 20s don’t typically think about life insurance but every year you wait, the cost of coverage goes up. The sooner you look into buying life insurance, the better.
4. Build a life insurance ladder
More coverage means your life insurance policy will be more expensive. However, you still need enough coverage to financially protect those who depend on you.
A strategy for cheaper life insurance is called laddering. You need different levels of coverage at different stages of your life. By building a life insurance ladder, you buy smaller policies that expire at different times.
5. Avoid simplified issue life insurance
Simplified issue life insurance means you answer a few questions about your medical history with no medical exam. This might seem like an attractive insurance option but it can cost twice as much because insurers are taking a greater risk.
For cheaper life insurance, it’s better to bite the bullet and get the medical exam if it means you pay less for the same amount of coverage.
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Things to consider when buying life insurance
There are many things you need to take into account before buying life insurance. When you start planning, you’re also more likely to be quoted cheaper rates. Here are some key factors to consider:
- Assess your current financial situation
- Determine how much coverage you need
- Understand what affects your rate
1. Assess your current financial situation
If you pass away unexpectedly, you need to consider the loved ones who financially depend on you.
Know exactly where you financially stand before purchasing a life insurance policy to figure out what type of life insurance you need and how much. While there are many benefits to having a good credit score, it doesn’t impact your life insurance premiums. Insurers assign you an insurance score based on your financial history, not your credit score.
2. Determine how much coverage you need
Don’t just pick a number out of thin air. Most people underestimate how much coverage they need.
Consider all of your debts and assets. If you have a considerable amount of savings and minimal debt, you may not need as much coverage.
3. Understand what affects your rate
Life insurance rates are determined by your age, health, the type of policy you purchase and the size of the death benefit. With a term life insurance policy, the length of the term will also affect your premium.
The bottom line
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