How can I lower my rate?
There are ways to save money when buying life insurance, but they dont always entail paying a lower premium immediately. As your top priority, look for a policy that meets your needs. Buying the wrong benefits for a low premium is a waste, not a saving. Beyond that, here are some ways to maximize your life insurance dollars.
Focus on financially sound companies. Dozens of companies sell life insurance. Limit yourself to companies with high ratings from two or more independent rating agencies. A low premium from a shaky company isnt a good buy!
Shop around to get a sense of the premium youre likely to pay. As part of this research, determine which rate class youll fit into. Most companies that sell individual life insurance have several different price classesusually called preferred (non-tobacco), standard (non-tobacco), preferred (tobacco), and standard (tobacco).
Take care of yourself. Find out into which rate class youll be grouped and, if necessary, consider making some lifestyle changesdont smoke, maintain a healthy weight and exercise regularlyto qualify for a more favorable rate class.
Be aware of premium discounts for particular amounts of insurance. Most companies offer rate discounts for specified insurance amounts. For example, you might actually pay a smaller premium for $250,000 of life insurance than for $200,000, or for $500,000 of life insurance than for $450,000, because a discount kicks in at the higher insurance amount.
If youre buying a term policy, look for renewal guarantees. A renewal guarantee gives you the right to start a new term after the current one ends, paying a higher premium based on your current age, but without requiring you to undergo a new health exam or submit any other evidence of insurability. Without the guarantee, youd have to shop for life insurance all over again, and if your health has deteriorated, you might have to pay much more or not get it at all.
When Should I buy life insurance?
Unfortunately many people put off thinking about life insurance and it costs them! If you put off buying life insurance until you are older you are going to be paying a lot more than if you had started a policy sooner. You will really pay a bundle, or not qualify at all, if you put off buying life insurance and then develop adverse medical conditions.
You need life insurance if some person would experience a significant financial loss in the event of your death. A common example of this is the family breadwinner whose income totally or partially supports a family. The death of that person would result in loss of income and financial harm for the remaining family members. Other reasons are to put your kids through school, pay the car note, mortgage, or other debts you have left behind, and pay funeral expenses. Those who might be leaving estates of $650,0000 or more often need life insurance to pay for estate taxes.
What if I get life insurance at work?
Group policies are a great way to get life insurance. You are usually quite limited to how much you can purchase, but the price is relatively inexpensive. This is mostly because when you are part of a group policy you are rated as part of that group. Therefore you can usually get a pretty decent rating even if you are older or have certain medical conditions.
However, there are definite drawbacks to only participating in a group policy. First of all you are limited on how much you can purchase. Most group policies only allow you to purchase a certain multiple of your salary. This probably will not give you all the coverage you need. Secondly this insurance is term. When you leave the job you almost always lose the policy. If you have developed medical problems you will have a tough time finding a company that will insure you and the cost will be shocking! Depending on the policy, when you retire you will be without coverage. You probably wont have life insurance companies beating down your door trying to offer you a policy when you are 60 years old and uninsured!
What's the difference between term and permanent insurance?
We went over this some of these in life insurance basics, but I especially like this analogyCompare term insurance to leasing an apartment and permanent insurance to buying a house. When you lease an apartment you pay a set amount each month and you are guaranteed that you will be able to live there for a certain number of years. You pay less with this option and have a great place to stay, but at some point the lease will expire. When this happens you have the option to leave or to renew your lease. If you decide to leave you pack-up your things and go find somewhere else to stay, but real-estate prices have probably gone up and youll be paying more for your next lease. You also have the option to renew, but once again youll probably have to pay a higher price for the next term.
Compare permanent insurance to buying a house. It may cost a little more, but there are some definite advantages. First of all you are building up equity (In your policy this would be the cash value). Also, as long as you make all of your payments youll never have to leave. If you needed to you could take a home equity loan out against the value you had built-up in the house. At some point you will have paid off the house and you will own it free and clear.
There are definite advantages to either option. Do your homework and find what works best in your situation.
Why buy life insurance for my child?
The main reason for buying life insurance on anyones life is to replace income lost or pay for expenses caused by the death of the insured person. If your child dies, theres no lost income, but there will be funeral, burial and related expenses that could run to thousands of dollars, which creates much stress in an already traumatic time.
Another reason for buying life insurance on a childs life is to guard against the possibility that, when the child is older, he or she might not be able to buy life insurance because of intervening illness or other circumstance.
Still another reason for buying life insurance on a childs life is part of a program to teach the child financial responsibility. Typically the insurance is whole life insurance, ownership of which is transferred to the child when he or she turns 21.
Tip: Ask if your own policy has a child rider option available. Some companies allow you to add at least $10k of coverage for your child onto your own policy for little cost.
