Life insurance tips for tightwads

by Barbara Marquand

Unless you've gotten life insurance quotes lately, the cost of coverage is probably less than you think.

Most Americans overestimate the price of life insurance by almost three times, according to recent research by the LIFE Foundation and LIMRA, a global research and consulting group. The average cost of a $250,000 level-premium term life policy for a healthy 30-year-old is $150 a year. On average, surveyed consumers guessed the annual cost at $400.

Even tightwads can find coverage to meet their budgets. Here's how:

1. Buy term life now

Term life is far less expensive than permanent life insurance, such as whole life and universal life. Term life covers you for a certain number of years and pays a death benefit to your beneficiary if you die within the term. The policy has no cash value. Permanent life covers you for your entire lifetime and includes a cash account that grows slowly over the years.

Term life insurance rates are generally lower the younger and healthier you are, so you save money by locking in coverage now, before you develop health conditions.

2. Compare term life quotes

Get insurance quotes from several carriers, and compare prices per $1,000 of coverage.

Understand the difference between level-premium term life and annual renewable term life. With a level-premium policy, the annual premium remains the same throughout the term.

With annual renewable term life, the premium increases each year during the term. In the early years of the policy, premiums are cheaper than those for a comparable level-premium term life policy, and in later years, they are more expensive than what you would have paid for level-premium term life. An annual renewable policy might be the way to go if you can't afford a level-premium term life policy now, but think your income will grow over the years.

3. Go for quality

Price is important, but not at the expense of quality. Review life insurance company financial ratings before you buy, and shop for policies that include important options. Those include a waiver of premium rider, which pays the premium if you become disabled and can't work, and the ability to convert to permanent life insurance, such as whole life and universal life. Some cheap term life policies can't be converted to permanent coverage.

Work with a life insurance agent to help you choose the policy that best meets your needs.

4. Buy more group life insurance

If you have life insurance coverage through your employer, it's probably not enough to protect your family. Check how much coverage you have, and whether you can buy more voluntary coverage through the employer's plan. Premiums through a group plan are often less expensive than what you'd pay for an individual life insurance policy.

5. Get free coverage

MassMutual offers a 10-year, $50,000 term life policy for free to low-income parents through its LifeBridge Program. To qualify, you must be between the ages of 19 and 42, and a parent or legal guardian of a dependent child under 18. You also must have a family income between $10,000 and $40,000. MassMutual issues the policy to a trust, and if you die within the term, the trust pays up to $50,000 for your children's education.

Still tempted to procrastinate? Imagine how your family would get by if you died tomorrow without life insurance coverage.

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