Ways to Save on Life Insurance
by Dr. Charlotte Gorman
1 . Shop around for the best prices for life insurance. Talk with a number of agents representing several different companies. The rates can vary significantly from company to company on a given type of insurance. Ask about discounts on premiums for nonsmokers. Also, ask if any other discounts are available. Even a small difference in premiums over many years can be substantial. You could, also, be drawing interest on the money you save.
2 . Check to see if your employer offers group life insurance to employees. Group coverage usually will be cheaper than an individual policy you buy on your own.
3 . When you retire, see if you can continue your group life insurance. Some employers will even continue to pay all or part of the premium for the retiree. Continuing the group coverage should cost less than individual coverage.
4 . Check with professional and fraternal organizations, clubs, various associations, and other groups to which you (or your spouse) belong to see if any of them offer group life insurance plans. It could be to your financial benefit to join one of the above just to qualify for its group insurance if the membership fee is not too high. Group rates should be less than individual rates.
5 . Don’t buy more life insurance than you really need. Determine how much coverage you actually need and take this amount into consideration when buying life insurance.
One rule of thumb is that you need coverage equal to seven times your annual salary. So, if you make $30,000 a year, you would need $210,000 worth of life insurance under this rule. However, the amount of your savings should be taken into account. Let’s say you have $150,000 in CDS–then you might need only $60,000 worth of coverage.
On the other hand, consider if you need any life insurance at all if no one depends on you for his or her livelihood and if you have enough money to settle your debts and pay for your funeral and burial expenses. However, if the direct opposite of this is true, you probably need life insurance.
6 . Consider which type of life insurance is affordable and adequate for you. Ask the agents with whom you talk to explain to you all of the various types of life insurance. (Term life insurance is the least expensive type of life insurance and, thus, can provide the most protection for the least amount of money.) If you have all of the necessary information on the types of life insurance, you will then be equipped to make a wise decision about what type you should buy for your particular situation.
7 . If you want additional life insurance coverage, ask your insurance agent about increasing the coverage in your present policy to see if that would be cheaper than buying a second, new policy either from your present company or from another company. It usually will be cheaper to buy one large life insurance policy rather than several small ones totaling the same amount as the one large policy. Depending on the breaking point, the more life insurance you buy, the less the cost per $1,000 worth of coverage.
8 . If you had particular medical problems when you took out your life insurance policy which caused your rates to be higher than the standard rates, and if these medical problems have improved or completely disappeared, ask your insurance agent if you might now qualify for lower rates. The lower premiums could leave you with extra money to save, pay other bills, or buy necessary items.
9 . If you were working in a dangerous occupation when you took out your life insurance policy but are no longer in that occupation, talk with your insurance agent to see if you are now eligible for reduced premiums, that is if you were paying higher than standard rates because of your dangerous occupation. Even if you are still working in the dangerous job, discuss the matter with your agent. Your occupation may no longer be considered as hazardous as in the past because of safety improvements. Reduced premiums mean you are left with extra money you can use for other things.
10 . Increase your coverage when necessary. For example, you may need more life insurance when you get married, when you have children, and when you buy a house. The premiums will be higher for additional coverage, but the increased coverage could be financially advantageous for your survivors.
11 . When you buy an airline ticket, charge it to one of your credit cards if, by doing so, the credit card company provides accidental death insurance which will be payable to your beneficiary(s) should you be killed while you are a passenger on the airplane. Some credit card companies automatically provide $100,000 (or more) worth of such coverage. The coverage is free.
12 . When you purchase an airline ticket, do so through a travel agency which automatically provides accidental death insurance on you which will be payable to your beneficiary(s) should you be killed while you are a passenger on the airplane. Some travel agencies provide $100,000 (or more) worth of coverage. This coverage is free.
13 . Ask people you know what insurance companies or agencies they use and if they would recommend them to others. Getting favorable recommendations could help you find reliable and stable insurance companies or agencies which can give you the most coverage at the lowest cost.
14 . By paying premiums annually, rather than monthly, quarterly, or semiannually, you usually can save some money on your premiums. Ask about this when taking out insurance. Some companies will add several dollars onto the regular premium if a policyholder pays other than yearly to help cover the cost of the extra paperwork. Saving a few dollars each year can add up to an important amount over many years.
15 . If you switch from one policy to another, make sure there will not be a lapse between the time your coverage will be effective on your new policy and the time you are no longer covered on your old policy.
16 . If you switch from one insurance company to another, make sure you collect any refunds of premiums due you from the previous insurance company. Even a small refund is worth your effort.
17 . It is extremely important that you read all of your insurance policies carefully and understand what they do and do not cover before you take out the insurance. If, however, you discover later that a policy you have really doesn’t cover what you thought it covered, then contact your insurance agent immediately and have the situation corrected, if possible.
About the Author
Dr. Charlotte Gorman is an Extension Agent, Family and Consumer Sciences, Texas Cooperative Extension, Texas A & M University System. She is the author of The Frugal Mind, The Little Book of Living Frugal, and co-author of Speak for Yourself. View her web site at www.digitex.net