Yes I know this is not your basic personal finance blog and you are not used to reading discussions about cutting back on lattes, saving money and planning for retirement. But allow me to share with you what I’ve learned about buying affordable life insurance.
Just last month I renewed my life insurance policy and got one for the next 20 years. I will share with you 4 tips I learned to help you buy adequate and affordable life insurance.
LIMRA, a life insurance industry backed consulting group recently reported that 30% of Americans don’t have life insurance. This number is up from 20% in the early 2000s. Of the 30%, several million households have teenage children.
As you know, not having life insurance can put your family in a difficult situation in the event of a catastrophe. You need life insurance at least until you and your family becomes self insured. After then, life insurance is simply a want and no longer a need. Many use life insurance for estate planning purposes as well, and even as investments.
How? I have heard firms on the radio that preach buying life insurance for your aging parents so when they pass away, you can benefit from the tax free life insurance proceeds. The proceeds minus premium payments over time adjusted for the time value of money and opportunity cost is the net return on investment. Unbelievable isn’t it?
But getting back to the point, I hope you find the 4 brief tips on buying adequate and affordable life insurance helpful.
You will be inundated with all kinds of information on the different types of life insurance policies. Do yourself and your family a favor. Keep things simple and choose a term life policy. A term policy insures you for a fixed term (i.e. 10, 20, 30 years) and is the most affordable life insurance policy you can get.
Permanent insurance is the next expensive bracket of policy, which doesn’t expire so as long as you keep making the premium payments. Part of your premiums are also deposited into a reserve account (cash value), from which you can withdraw money upon need.
If you are not confident that you can self insure your family by the time your term policy ends, look into a term insurance policy that gives you the option of converting into a permanent insurance policy without having to undergo a health exam all over again.
As you know, the premium of a life insurance policy considers your overall health and wellness condition.
Because insurance policies favor the young and healthy, it is smarter to lock in a long term policy when you are young and healthier.
This will be cheaper for you over the long run when compared to buying policy when you are older, are likely less healthy and more likely to die sooner.
Take a close look at life insurance provided by your employer. Typically you are provided a small amount of coverage for free, and anything in addition costs more money per $10,000 of coverage. Shop around independently and compare quotes received to what your employer would charge you. You will be surprised. Employer insurance plans are not always the best.
Corporate group life insurance plans often work out better for those who are older and not as healthy. While a private policy might decline these individuals, they can obtain life insurance through their employer. On the other hand, younger and healthier individuals can shop around and take advantage of more affordable life insurance policies.
One other disadvantage of corporate insurance policies is that they are not portable. When you leave your employer, or when your employer decides to leave you, your life insurance policy expires with that relationship as well.
You can’t do this with an employer sponsored group insurance plan, but if you are on your own, insurance companies give you the option of paying a lump sum or monthly payments over the policy life. Evaluate the two options carefully.
Many times, monthly installments come with fees and added costs. If there is no benefit to paying in lump, then you might decide to pay monthly for cash flow purposes. Otherwise, always pay in full to get the full payment discount.
Life insurance is very important, and I know I don’t have to remind you of that. It is an inevitable expense item in your budget, so take the steps above to ensure you are paying the lowest premium rate possible for the best policy.
Take your time and shop around. Two good websites that scour the web for quotes based on your situation and requirements are the following:
Use these to select the best coverage for you at the best price possible.
Anything you’d like to add to these tips on finding an affordable life insurance policy?