Life Insurance May be Complex, but Saving on it does not need to be.
Failure to properly understand these methods could cost you lots of money.
Read On - to Save.
Wondering about life insurance rates? Thinking of how to save money? Checking with friends? Don't be put off by all the complexity, just review our seven simple ways to save on life insurance.
In 2006, National Public Radio reported that life insurance rates have gone down “50 percent …”in “10 years.” This is great news for consumers. Professor Neil Doherty from Wharton Business school stated from that same article that “It’s become much easier to shop for insurance these days.” Partially because of the internet, life insurance rates have gone down and are generally down to stay.
That was over ten years ago!, How do you save money now?
Caution though- Failure to understand the life insurance process could cost you dearly.
First Simple Way to Save on Life Insurance – Buy Term and Forget the Rest.
This site is dedicated to assisting consumers in their quest to discover the differences between whole and term life insurance. Occasionally whole life insurance can be the best bet. However, typically a level term life insurance policy is the best bet for the vast majority of Americans. Term life, which is pure insurance, is easy to purchase, simple to understand, and fits well into a modern financial planning model. Since term does combine insurance with savings, the policies are much less complex.
There are other ways that term life often beats whole life, one of which is the fact that since it is a simpler product it is much easier to compare one term life policy with another. Whole life on the other hand is not. It can be difficult to understand loan provisions, past dividend rates, and future requirements with these types of life insurance policies.
And, if saving money is your main goal, it is hard to beat term insurance.
By and Large Term Life Insurance is often 1/10 to almost 1/20 of the cost of whole life. It is single biggest method to saving on life insurance.
"Term Life Insurance is often 1/10 to 1/20th the cost of whole life..."
ABOUT WHOLE LIFE INSURANCE:
Whole life insurance is a type of Cash Value life insurance, which you purchase for the rest of your life. There is no end to whole life insurance. The cash component may be available to receive dividends from certain participating life insurance carriers. Whole life insurance usually takes ten or so years before the savings account accumulates any significant savings and sometimes 15 or so years before their is any real reason to buy the the policy.
Whole Life Insurance can often take ten or so years before beginning to show any type of financial savings.
Many life insurance agents claim that whole life insurance is a “great way to save money.” This website generally believes that for the vast majority of Americans, whole life insurance is not a best in class savings plan.
ABOUT TERM LIFE INSURANCE:
Term Life Insurance is simple plain pure insurance. It is set for a guaranteed number of years. Term life insurance contains no cash value. Term life insurance is the type of insurance that most of the major national radio hosts such as Suze Orman, Clark Howard, and Dave Ramsey recommend.
Many life insurance agents prefer Not to sell Term Life Insurance, often because the commission payout is low.
Second Simple Way to Save on Life Insurance – Shop Around.
It pays to Shop!
When we say shop around, the best practice may involve this three step process:
Step One: Call your Home/Auto Agent and request a Term Life Quote.
Step Two: Call any given Life Insurance Company and again insist on the Same Term Life Policy Quote.
Step Three: Call an Independent, such as Us, and Request the exact same Term Life Quote.
A typical result of this process will reveal that the First Step will lead to the highest price. While the second step will reveal a slightly lower price. Usually the independent agent that works with 60 or so life insurers should be able to get you the best price.
A CAPTIVE INSURANCE AGENT VS INDEPENDENT INSURANCE AGENT:
Many consumers are unaware of various types of insurance agents out there.
“A captive agent represents a single insurer. Agents that represent Allstate or State Farm are captive agents. An independent agent represents multiple insurers.” says Marianne Bonnerof the Balance
Although shopping around may seem like a suggestion that is hardly worth mentioning, I cannot tell you how many people I speak with that just end up buying the first life insurance proposal that is put in front of their face. I cannot over emphasize the need to call multiple people and “ask lots of questions.” Many insurance agents really only represent one line of insurance.
In the end it pays to shop for life insurance.
Third Simple Way to Save on Life Insurance Discuss your past medical history with an Experienced Agent.
There are a number of underwriting criteria that determine your life insurance rates. The underwriting criteria help to determine the insurance class that you fall into. There are currently four general life insurance classes.
When clients look at life insurance quotes without speaking with an agent often they make the mistake of assuming that they will quality for the lowest rated carrier with the best health class. However it just does not work that way. Why? Each Insurer has their own rating tables and underwriting criteria. Insurance companies do not all use the same guidelines. One insurer may have a cholesterol limit of 200 while another might have it at 210. If your cholesterol is 205, how will you know which carrier to go with?
This is where your life insurance agent will step in. Ask your broker or agent these important questions about your underwriting considerations.
Ask, Advise, and Process.
WHAT ARE THE UNDERWRITING CRITERIA THAT LIFE INSURANCE AGENTS WILL WANT TO DISCUSS WITH YOU?
Age, General Condition, Medical History, Smoking Status, Pharmaceutical History, Family Medical History, Career, Dangerous Avocations, Current Life Insurance Amounts, Income, and others.
If you think that you can shave some dollars off of your life insurance policy by not being truthful, please read point Six: Be Honest.
Fourth Simple Way to Save on Life Insurance – Apply Now, Don’t Wait
Want to know a secret? Life Insurance rates are created using numerous criteria. However…
Your age is One of those Criteria.
All other things being the same: a 46 year old pays more than say a 45 year old. And a 43 year old pays more than a 42 year old. Obvious right?
So, by waiting to buy life insurance, every year that you get older, your rates will just go up each and every year, generally speaking. It is possible that life insurance rates could, across the board go down, however I would not depend on this.
So in the end, when you decide that you need life insurance, move intentionally and swiftly. There rarely is value is waiting.
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The World of Life Insurance is Complex, Don't Get Lost.
Fifth Simple Way to Save on Life Insurance – Only buy with an A Rated Carrier.
Although lower rated carriers, may in fact be less expensive, you may not end up saving money in the long run.
Why Won’t I Save Money buying a lower rated life insurer? The typical A rated life insurance company has a very small rate of becoming distressed. But a B rated carrier is much higher. Although your life insurance rates will be lower for perhaps the first ten years, its possible that may need to go back out, in the marketplace to procure a new life insurance policy. That second life insurance policy reissued from a new life insurer will be much more expensive for numerous reasons, mostly including your age. The rates for a 35 year old are much less expensive than say a 45 year old.
Should you worry about the difference between an A+ and A rated carrier?
The minor differences that exist at that level may or may not be important. Generally my advice is go with what you believe makes the most sense for you and your family. Most agents, let alone people do not even know what the financial differences are between those two grades of companies. Because Credit Rating Agencies do not fully divulge their ratings formulas, we are left to parse words and documents. In the end though, it is pretty logical that an A+ rated carrier may slightly be better than an A rated carrier.
Sixth Simple Way to Save on Life Insurance – Be Honest.
Another secret of buying life insurance is to know that life insurers are really good at digging up facts. Facts about you, facts about your life.
They will run reports and potentially take medical tests. Reports with your DMV records, pharmaceutical records, physician records and many more. If you end up, not being entirely truthful with your insurance agent, your life insurance proposal may get declined or rated lower than it could with another carrier. You should be careful about this.
You may have to take a paramedical exam, which is a bit like having a nurse come to your house to exam you. Part of the paramed visit is often blood and urine tests. If they insurance company finds something that you did not disclose - they may be forced to guess at why they are finding it and hence decline you.
However, if in the beginning, you are upfront and honest with your agent – then your agent can use the information you share to proactively hunt for a good specific insurance carrier for you.
Seventh Simple Way to Save on Life Insurance – Insure What you Need, Not What you Don’t.
In other words, don’t over insure. Although this is not nearly as of an common issue as is with Whole Life Insurance, it can happen with Term Life Insurance. Occasionally.
How Much Life Insurance is the Right Amount of Term Life?
The good rule of thumb is ten times earnings. Both spouses should be insured these days. Which means ten times total earnings, but does that mean ten times earning for both people or ten times earning for each of your individual earnings. If One Spouse makes $60K per year and the other $30K per year, don’t necessarily believe that both of you need $900K in term life insurance. In this situation perhaps a $600K and a $400K term life policies may be your best bet.
Now, the decision on how much life insurance to purchase is a personal and financial decision that really only you and your family can make. Some clients enjoying having a little extra and are Ok with paying a bit more. However, don’t just choose an amount that someone tells you. Run the numbers yourself.
If You Want to Consider Lowering your Life Insurance Prices down Even a Bit More, Consider Laddering:
The theory of Laddering Level Term Life Insurance Policies involves taking that $600,000 term life policy and breaking it down into perhaps two separate policies. One twenty year $500K policy and one $100K ten year policy. In ten years time, you can let the smaller $100,000 policy drop off and just have the $500,000 term life policy left. In ten years time, you may find that you have saved extra money and no longer need that second life insurance policy.
Thank you for reading 7 Simple Ways to Save on Life Insurance.
Life Insurance does not have to be complex, but it is. We hoped you enjoyed 7 Simple Ways to Save on Life Insurance. Should you have any questions please feel free to contact us.
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