The price you pay for life insurance largely depends on things you can’t or don’t want to change: your age, health, habits, and other lifestyle choices, such as smoking and skydiving. Still, there are ways to save when buying a policy.
Buy the type of insurance you need. Though there are dozens of variations, life insurance basically comes in two flavors: term or permanent. With a term policy, you pay an annual premium and, assuming you die during the term of the policy, the insurer guarantees it will pay your beneficiaries the face amount of the policy upon your death. A permanent policy does the same thing, but premiums are higher, because you build up cash value that you can borrow against or withdraw if you cancel the policy. The right type of insurance for you depends on several factors, including your age, family situation, and financial goals. Often a term policy can save you money.
Don’t be loyal to one company. You may receive free or discounted life insurance through a current or former employer. But you’ll probably need to supplement that coverage, and buying additional insurance from that insurer may not get you the best deal. Keep in mind, though, that you’ll likely have to qualify medically for a policy you buy on the open market, which may not be required if you buy through an employer.
Negotiate. Smoke one cigar a month? You’ll probably be lumped into the same category as someone who smokes two packs of cigarettes a day. And a dangerous activity, such as skydiving, that you tried just once could also ratchet up your premium, even if you have no intention of doing it again. Your premium may be negotiable, if you write to the insurer explaining why you think you should qualify for a better rate.
Find a specialist if you have health problems. Some insurers specialize in covering people with heart disease, cancer, or diabetes. These companies employ underwriters trained to differentiate, for example, between people with high blood pressure who take their medication regularly and those whose hypertension is uncontrolled.
Buy in bulk. If you’re planning to buy $950,000 of coverage, a $1,000,000 policy may actually cost less. Insurance is priced in multiples of $250,000, and an insurer may charge disproportionately more for an in-between amount.
Avoid hidden fees. Before you sign up for any convenience, find out how much it costs. For example, some insurers charge for deducting monthly payments automatically from your checking account.
Choose riders carefully. An insurer may pad your policy with extras called riders. For example, the accidental-death rider, more commonly known as double indemnity, pays twice the normal death benefit if you perish in an accident. But the chance of that happening is quite small and may not be worth the extra cost. Be sure you understand what riders you are buying.
Review. It’s wise to review your policies every two or three years, especially permanent policies, to see they can be leveraged or exchanged into a new lower-cost policy.