10 Tips to Save Money On Life Insurance (Updated for 2023)
Most of us need some life insurance, but that doesn't mean that we should overpay for it.
Knowledge is power, and learning a little bit about the life insurance industry could save you a considerable amount of money.
Every company has their own pricing, health guidelines and underwriting criteria.
As an independent agency that represents more than 50 top-rated companies, our goal is to match you with the best option available.
To help you save money on cost of your policy, we have provided 10 tips to save money on life insurance. We've also discussed a few recent trends that could affect the future of the life insurance industry.
Here’s what we'll cover in this post:
Quick Article Guide
Here’s what we'll cover in this post:
1. Don’t Wait Another Year
If you’re like most people, you probably have the intention to do things like buy life insurance, but life gets in the way. Between family life and work, setting aside time to purchase life insurance seems impossible.
To help incentive to you find time to buy the coverage you need, you should know that procrastinating is costing you money. Even if your health stays the same as last year, your life insurance rates will have probably increased by at least 8 to 11%.
Every year after the age of 50, your life insurance rates will increase by as much as 15%!
Instead of waiting another year, buy your life insurance now when you’re younger and healthier. In addition to rates increasing with age, if you gain a few pounds or develop a health issue, your insurance could become more expensive or even unaffordable.
2. Layer Your Coverage
If you’re like most people, your need for life insurance will decrease as you get older. And if you’re buying life insurance to provide a backup source of income to your family, the amount of years that you need to insure should decrease as you near retirement age. The same is true with a mortgage. Your need for life insurance should decrease as the mortgage is paid off.
To avoid being over-insured, and overpaying for life insurance, you can stagger your coverage to coincide with declining financial obligations like a mortgage. Also known as layering, our clients often purchase more than one term policy to protect their most important life events.
As an example, let’s assume you’re a 49-year-old male in good health. You have ten years left on your mortgage with a balance of $279,571. Your family depends on your take-home income of $5,000/month, and they will need this income until you plan to retire in about 20 years.
Most life insurance agents will tell you to buy a policy that provides protection until your farthest-reaching life event, and enough coverage to settle all of your financial obligations.
In this case, a 20-year term for $1,500,000 would probably be their recommendation.
Here's what most agents would recommend in this scenario:Buy a 20-year term for $1,500,000
Monthly rate: $186.02
Total cost over 20 years: $44,644.80!
(20 years of replacement income x $60,000 per year + $279,571 in mortgage debt = $1,479,571)
To layer your coverage, we would recommend this approach instead:
Buy a 10-year term, a 15-year term, and a 20-year term.
1. Buy a 10-year term for $900,000
Monthly rate: $62.93
Total cost of policy over 10 years: $7,551.60
In 10 years, your need for coverage will decrease by $879,571
(10 years x annual income take-home income of $60,000 = -$600,000)
(Mortgage has been paid off = -$279,571)
2. Buy a 15-year term for $300,000
Monthly rate: $33.94
Total cost of policy over 15 years: $6,109.20
In 15 years, your need for coverage will decrease by $300,000
(5 years x annual income take-home income of $60,000 = -$300,000)
3. Buy a 20-year term for $300,000
Monthly rate: $42.99
Total cost of policy over 20 years: $10,317.60
In 20 years, your need for coverage will decrease by $300,000
(5 years x annual income take-home income of $60,000 = -$300,000)
Cost of all 3 policies over 20 years: $23,978.40
Total savings by layering coverage: $20,666.40!
In this scenario, layering your coverage would save you more than $20,000 over 20 years! Buying multiple life insurance policies is relatively simple and it only requires one exam and one phone interview. You will not have to complete an exam for each policy.
3. Avoid DNA Testing
We first reported on DNA testing back in 2018 after the topic was featured on an episode of Keeping Up with the Kardashians. However, in the last few years, Ancestry and DNA testing has become less expensive and more popular with people who want to learn about their family lineage or determine their predisposition to terminal diseases like cancer.
We don’t advocate avoiding Ancestry or DNA testing, but we do recommend that you buy your life insurance first. In 2018, the former Insurance Commissioner of California, Dave Jones, made this statement, “Consumers need to think carefully about whether they want to take these tests. It will not impact their health insurance under current law, but it could impact their life insurance.”
The Department of Insurance also stated that the life insurance companies have a right to request all your medical records including any genetic tests that you’ve taken. As the famous saying goes, “Ignorance is bliss,” but if you are set on getting your DNA tested, go for it. However, we think it is in your best interest to buy your life insurance policy first.
4. Make Annual Payments
Like most businesses, life insurance companies prefer to receive their money upfront. To help incentive their customers to pay their insurance premiums a year in advance, most insurers offer a 4-8% discount. This saves them the hassle of billing you, and it makes the odds of forgetting to make a payment much lower.
If you decide to switch your payments to annual, you can always change your billing frequency to monthly, quarterly, or semi-annually, especially if cash flow is an issue. It's also important to note that most companies will provide you with a prorated refund if you later decide to cancel your coverage.
5. Start an Exercise Routine
Trying to lose weight before your life insurance exam seems like a great idea, but for most people, weight has little to no effect on the cost of their life insurance policy. The truth is, most companies have extremely lenient height and weight guidelines and in some cases, applicants who are as much as 40 pounds overweight can still qualify for preferred best rates.
If you’re as much as 60 pounds overweight, some companies will overlook your weight if and offer you a preferred rate class if you exercise regularly and are in overall good health. If you’re not in good health, your health issue is more likely to increase the cost of your life insurance than your weight.
Most companies base the price of your coverage on your most serious health issue, not minor issues like elevated blood pressure, cholesterol, or weight. The only exception to this general rule of thumb is for people who are extremely obese. If you’re more than 100 pounds overweight and you have a serious health issue, like a history of heart attacks, the life insurance companies will view your weight as an additional risk.
6. Buy Term Insurance
Almost every life insurance adviser will tell you to avoid any life insurance policy that promise to build a cash value. Instead of tying your money up in a life insurance policy with expensive annual investment fees, money management fees, and a rising cost of insurance, Follow the advice of Suze Orman, Dave Ramsey, Bob Brinker and many others, “Buy term and invest the difference.”
With term life insurance, you do not have to worry about the performance of your investments and whether they’ll keep pace with the rising cost of your policy. The truth is, universal life insurance policies rarely perform well, which is why they have been a topic of debate in recent years especially as retirees continue to lose their coverage due to poor investment performance.
Instead of paying 2-3x more each month for the same amount of coverage, we recommend saving your money and looking in a rate that is guaranteed. If your worried about outliving your coverage, you can also buy a guaranteed universal life insurance policy. These policies offer level coverage and rates to age 90 or later without forcing you to invest.
7. Take A Medical Exam
Completing a medical exam for your life insurance policy used to save you a considerable amount of money. In fact, in some situations, life insurance without a medical exam was as much as 30% more. In recent years, however, this once commonly accepted rule has changed.
For applicants who under the age of 60 and in average or better health, skipping the medical exam might not cost you anything extra. Some life companies have even begun offering more competitive pricing for healthy applicants who have a history of routine follow-ups with their doctor.
If you’re over the age of 60, or if you have some serious health issues, taking an exam might be your only option for coverage. Although some term life insurance companies do not require an exam for approval, these companies will electronically review your medical records and your prescription history.
If your not sure of your best options, feel free to give us a call. One of our expert agents will be able to find your best options by asking you a few questions about your health and lifestyle. Toll-free 855-247-9555, or you can request a instant quote online by clicking the banner below.
8. Ace Your Exam
If taking an exam is in your best interest, preparing for your exam could help you save money. Life insurance companies rely on a free mini-medical exam to get a snapshot of their applicant’s health. Like a routine physical, these tests are designed to evaluate your bad habits, liver and kidney functions, build, and blood pressure.
To provide the best possible snapshot of your health, we recommend scheduling your exam for first thing in the morning before breakfast or coffee. The examiner will come to you, so avoid the stress of traffic and waiting in line. Not only will this make the process more convenient for you, it will also help with your blood pressure.
In the morning, our bodies tend to be a few pounds lighter, and our lab results are usually a bit more favorable. It’s also advisable to get a good night’s rest, drink plenty of fluids, and avoid alcohol for at least 24 to 48 hours before your exam. We also recommend eating healthy and avoiding the gym the day before your exam to avoid any lab test abnormalities.
9. Shop the Market
In the life insurance industry, every company sets its own rates and underwriting guidelines. As an example, some life insurance companies offer the lower rates to young and healthy people, but tend to overcharge older people or people with health issues. On the flip side of this, some companies offer extremely competitive pricing for common health issues like diabetes.
Depending on your age, health, gender, and lifestyle, chances are your rates may vary as much as 300% from one company to another. Why pay two to three times more for the exact same coverage?
The life insurance industry is heavily regulated to make sure each company pays their claims, and has enough cash on reserve to pay their future claims. In addition, life insurance companies must undergo routine audits to prove their financial stability.
This is why so many financial advisers say, “Buy the least expensive policy you can find from a top-rated insurer and save the difference.”
Below we've provided a table showing monthly rates from a dozen of the top-rated life insurance companies we represent. These rates are for a 40-year-old female in excellent health.
10-Year-Term, $250,000 Coverage Monthly Rates
|Company||A.M. Best Rating||Monthly Cost|
|Mass Mutual||A+ (Superior)||$10.81|
|Pacific Life||A+ (Superior)||$11.03|
|Banner Life||A+ (Superior)||$11.17|
|Guardian Life||A++ (Superior)||$12.02|
|Penn Mutual||A+ (Superior)||$12.03|
*Sample monthly rates are accurate as of 12/27/2022 and are provided for illustrative purposes only.
10. Work with an Expert
You might be tempted to buy your life insurance from a friend or relative to help them get started in the insurance industry. While this is a kind act, it may not be the best decision if you want to cut your cost. In fact, even working with a local agent that primarily sells home and auto insurance can cost you a lot more, especially in the long run.
As we mentioned before, every company has its own underwriting guidelines and pricing. By working with an experienced independent life insurance agent, you will save you time, money, and hassle. An agent’s job is make sure you apply with the right company for your lifestyle and health profile.
Instead of applying with the company that appears to have the lowest rates online, your agent should compare you’re your health and lifestyle against each company’s guidelines to make sure you apply with the right company. This is especially important if you have a few health issues because applying with the wrong company could result in your application being declined.
We Can Help You Save
Our agency has helped thousands of families and business with their life insurance needs, and we can help you too. As an independent agency, we represent more than 50 top-rated life insurers to make sure we always match our clients with the best options available.
We specialize with clients who are considered to be a high risk for life insurance, but if you’re in excellent health, we can help you save money too. Having access to each company’s rates and guidelines allows us to quickly compare your options to make sure you save.
As an example, some companies overlook family health history, cholesterol medication, blood pressure medication, an occasional cigar, etc. By matching you with the best company for your health profile, we’ll make sure you get the lowest rate available.
We can also help you find your best option including term life insurance policies that no not require a medical exam or policies that offer level rates and coverage until age 90, 95, 100, 105, 110, or 120. Call us today toll-free at 855-247-9555, or request a free quote online below to instantly compare rates from dozens of leading insurers.
Managing Partner and Co-founder
Cliff is a licensed life insurance agent and one of the owners of JRC Insurance Group. He has helped thousands of families of businesses with their life insurance needs since 2012 and specializes with applicants who are less than perfect health. In his spare time he enjoys spending time with family, traveling, and the great outdoors.