Life insurance does not need to be expensive or complicated. At Term Life Advice, we work with so many clients who are surprised at just how much money they can save, all while keeping their family’s finances secured and protected.
From working with an independent agent like us to reevaluating your coverage midway through your term, these are the 22 savviest money-saving tips, tricks, and strategies we share with our clients to help them save money on their life insurance coverage.
Quick Article Guide:
- Use a Qualified Independent Agent
- Know When to Spot and Avoid a Rookie Agent
- Quiz Your Agent
- Find an Agent Who Will Put In the Extra Work
- Choose an Income Payout Over a Lump Sum Death Benefit
- Layer Multiple Policies to Cover Short-Term and Long-Term Needs
- Purchase a Second-to-Die Life Insurance Policy
- Bundle All Your Insurance Policies
- Take a Medical Exam
- Focus on Your Health and Get Into Shape
- Ask For Health Class Re-Classification
- Lower Your Coverage Amount
- Buy More Coverage
- Pay Your Premium Annually, Not Monthly
- Apply for an Annual Renewable Term (ART) Policy
- Find A Company That Uses Your Real Age or Allows You to Backdate Your Policy
- Purchase Your Life Insurance Now
- But Wait to Buy Coverage If You’re Older
- Avoid Mortgage Life Insurance
- Don’t Fall for TV Life Insurance Scams
- Consider Group Insurance
- Finance Your Premiums
Working with a knowledgeable independent agent might be the easiest way to save a substantial amount on your life insurance coverage—often anywhere between 10-70% in savings. Because independent agents work with multiple companies—at Term Life Advice, we work with over 60 top-rated insurance companies—they can shop around and explore hundreds of policy options to find you the lowest price. If you request a quote, you’ll get multiple results and price points, with plenty of options to choose from.
Oppositely, a captive agent—one that works for a single insurance company—can only offer you the prices and results of that particular company. If you have a specific medical or personal concern, you are solely dependent on how that agent’s company underwrites your unique situation, even if there is another company out there who may offer you a lower price for the same coverage.
An independent life insurance agent is especially crucial if you have a less-than-great medical history or any preexisting health conditions. Life insurance companies classify people based on the risk of covering them—so the better your health, the lower the risk and the lower the premium you’ll pay.
Generally, insurance companies will classify you into rate classes based on their risk of insuring you. While there are sub-standard, and sometimes more nuanced classes, the four most common ones are:
• Preferred Plus (PP)
• Preferred (costs 25% more than PP)
• Standard Plus (costs 50% more than PP)
• Standard (costs 75% more than PP)
Our job as an independent agent is to help you find the insurance company that will give you the best coverage for the best price based on personal history and health. There are several factors that could result in higher costs, and we do our best to minimize the price you pay for the coverage you need. Some of these personal circumstances and health conditions include:
Health Factors That May Cause Higher Rates
• Being Overweight
• Diabetes Type I or II
• Elevated Liver or Kidney Numbers
• Heart Disease
• High Blood Pressure
• High Cholesterol
• History of Cancer
• Sleep Apnea
• Stroke or TIA
Personal History That May Cause Higher Rates
• Criminal History
• Driving Record (Multiple Tickets or DUIs)
• Drug or Alcohol Abuse
• Family Medical History (Addiction, Cancer, Diabetes, Heart Disease)
• Hazardous Occupation
• Personal Hobbies (Flying, Scuba Diving, Racing)
• Tobacco Use
• Travel Plans
Every life insurance company treats these conditions and concerns differently. Some may be more stringent in regards to your family’s medical history; some may be more lenient with smoking cigars or pipes, others might charge you the same as cigarette smokers for those actions. As a knowledgeable and experienced independent insurance agency, we can match you with the best company for your situation.
Not every independent insurance agent will be able to save you money; being able to save a client a considerable amount of money typically comes with years of experience.
For example, a rookie agent may simply give you the best rate they can find as long as you seem reasonably healthy. Let’s say you’re a 40-year-old male looking for a 20-year term policy for $500,000… and that you take blood pressure medication. An inexperienced agent may assume you quality for a Preferred Plus class and suggest purchasing insurance with the cheapest company.
But with that cheaper company, you don’t actually qualify for their best rate. They do not allow you to take blood pressure or hypertension medication and qualify for their Preferred Plus or Preferred classes. So if you applied to that insurance company you’ll actually only qualify for their third best class, which could cost you several hundred dollars more per year than if you had applied with a different company.
What looks like a good deal on the surface, may not be so once all your history, personal habits, and conditions are taken into account. An experienced agent will get to know you and your situation before recommending a policy to you. Using a rookie agent could end up costing you thousands of dollars by the time your term is up.
You may understand why it’s important to have an experienced independent insurance agent, but you also need to know how to spot someone with experience. After all, finding the right agent can save you 10-70% on your coverage.
Before settling with an insurance agent, ask them these five questions to determine if they can properly handle your case:
1. What is your insurance license number? – Once you have their license number you can look them up on your state’s department website to verify if they have any complaints against them and how long they’ve been in business.
2. How many insurance companies do you represent? – If they work with several insurance companies, you’ll have a good indication that they are an independent insurance agent. Plus, the more companies they work with, the more options you’ll have to find a great rate on your coverage.
3. Can you show me and explain all my rate options? – Sometimes the quote your insurance agent is giving you isn’t actually the lowest rate. If it isn’t, you have the right to ask why they’re recommending it. Often, they may be suggesting a specific rate because that company is more lenient with their underwriting guidelines or has a better rating.
4. Can I see the underwriting guidelines for the quote you’re giving me? – You want to make sure they’re giving you a quote for the correct rate class. By understanding the company’s underwriting guidelines for various health concerns, you’ll know that you’re being given the right rate class and price.
5. Can I hear from your past clients? – Testimonials will give you the best idea of the agent’s experience. A great agent should have multiple positive testimonials to share with you.
It’s essential to find an agent with experience because they will understand that no two cases are alike. Many of our clients come to us with more than one preexisting personal situation or health condition. While we can immediately help them find an insurance company that offers better coverage for high blood pressure or one that works best for clients with diabetes, it gets more complicated when there are several health issues combined.
Because we’re always working with new cases, with circumstances we’ve never encountered before, we don’t spend time guessing which insurance company will give you the best coverage and lowest rates. Instead, we contact those insurance companies directly, describe your unique situation, and ask them what rates they would provisionally give you. These rates are known as a tentative offer or quick quote; it’s the coverage price they’re willing to offer based on limited knowledge and is not necessarily a firm offer. The offer may change based on medical exam results or medical records. But it gives us a way of finding out which company will be the most lenient with a client’s circumstances, and allows us to compare rates and coverage across several insurance companies.
We’ll often receive a wide range of offers, and it then becomes our job to sort through each response to find the best deal for our client. By putting in the extra work to contact multiple life insurance companies and compare their quotes, we are often able to save our clients 25-50% on their coverage.
For the most part, life insurance companies pay out a lump sum upon the death of the insured. However, there are some companies that offer policies that pay out an income stream instead of the lump sum. You can often save 10-30 % off a typical policy with this strategy.
While a recurring payout could be a good option for any client, there are four specific situations where it’s more beneficial than a single lump sum death benefit.
If the purpose of your life insurance coverage is to replace your income—as it is with most of our clients—a recurring payment makes sense. This option allows you to protect and replace your lost income with an income stream.
Sometimes, our clients have beneficiaries with special needs or disabilities. Assuming a trust has been set up for them, a recurring payout gives them a long-term benefit that works around needing to hire a trustee to manage the large lump sum funds.
We understand that just because you have the financial wisdom to plan ahead by purchasing life insurance, that acuity may not be present in your beneficiary. With an income payout, they would receive smaller sums of money that would be more difficult to misuse than a large lump sum payout.
An income payout can allow you to continue to support a philanthropic, community, or religious organization long after you’ve passed. You can choose the amount and term length for them to receive your benefit so that it remains the same as you’re contributing now.
Some insurance companies will allow you to combine an immediate lump sum benefit with this income option. This means your family would still have the resources to pay for any immediate expenses, like funeral costs, or paying off debt. Plus, the recurring payout would give them ongoing financial support when it comes to future needs like food, utilities, childcare and tuition, healthcare, and mortgage or rental payments. Regardless of the method, your family would still receive the full benefit of your coverage, while you save money in providing that security.
While income stream payouts are more difficult to come by, we work with dozens of companies and can help you find a policy with this type of benefit.
If you consider this logically, the financial situation you are in now will be much different in 10 to 20 years. This is why 20- or 30-year term life insurance policies can be tricky. Assuming you’re carefully investing in the future and paying off debts, you probably won’t need as much coverage halfway through your policy.
This is why we recommend purchasing two policies to cover both your short-term and long-term financial needs. You may need $1 million in coverage now, but if you’re diligently saving money for the future as you continue to work, you most likely won’t need that same $1 million coverage when you retire. Instead, consider purchasing two separate policies (a short-term and long-term) to provide coverage for your changing financial situation. For example, you can purchase two $500,000 policies, one at a 15-year term and one at a 30-year term. This would meet your immediate need for $1 million coverage now, but won’t lock you into making the same premium payments when that amount of coverage is no longer needed.
By layering a short-term and long-term policy, many of our clients have been able to save 10-30% on coverage without sacrificing their security.
A Second-to-Die policy is beneficial for those looking to use their life insurance as a tool for estate planning. It insures two people—typically a married couple—and only pays out after the second person has passed away. Selecting this type of policy can save you 10-20% off a typical policy, since both people have to die before the company pays the death benefit.
Many insurance companies offer multi-policy discounts that could end up saving you 10-15% on coverage. The savings and number of policies required varies, but with Farmers Insurance, for example, the discount is available once you purchase three policies. If you already have home or auto insurance with a company, adding life insurance may result in enough savings to completely negate the cost of the new policy.
For the most part, home or auto insurance companies do not offer the best or most affordable policies when it comes to life insurance, but as a bundle, you could end up saving money. This money-saving tip typically works best for individuals who are generally healthy and would just like an extra bit of coverage, since most auto and home insurance companies are stringent and can be overpriced when covering someone with health conditions.
If you’re a healthy individual looking to apply for life insurance, you should definitely take a medical exam to take advantage of that. “No exam” insurance policies often cost 10-40% more than if you take an exam before purchasing life insurance.
To put it simply, the more an insurance company knows about you, the less risky it becomes to insure you and the less money they will charge you. The only time a “no exam” policy is beneficial is if you need immediate coverage (and don’t care about the cost) or if you believe you have a medical issue that has yet to be diagnosed. A “no exam” policy will get approved more quickly, but ultimately, taking an exam will save you money on your coverage.
Most life insurance companies have strict health guidelines they will use to qualify you into a rate class. The different classes are often separated by just a few pounds or blood pressure points, so by getting into shape you could move up a class and save anywhere from 25-50% on your coverage.
Only 10-20% of people who apply for life insurance actually qualify for the best rate, so that means the majority of us have room for improvement. Because there’s a 25% cost difference between rate classes, small changes to your health—especially before a medical exam—could have a substantial impact on the cost of your coverage.
In general, life insurance medical exams test for the following:
• Blood Pressure
• Liver and Kidney Functions
• Sugar Levels
It’s important to note, you should always talk to your doctor before beginning a diet or exercise routine. But by eating sensibly, reducing stress, staying hydrated, getting restful sleep, and exercising, you could potentially improve the results of your exam.
For example, let’s say these are the maximum blood pressures Life Insurance Company A will allow for their top four classes:
• 135/85 – Preferred Plus
• 140/85 – Preferred
• 145/88 – Standard Plus
• 150/88 – Standard
If your blood pressure level is 142/83, you would qualify for their Standard Plus class on that basis alone—and that costs 50% more than their Preferred Plus class. By buying a 30-year term policy for $75 a month as a Standard Plus qualifier, you would be losing $6,000 over the lifetime of your policy (than if you would have qualified for Preferred Plus).
Beyond the health benefits, getting into shape will clearly result in long-term savings on your life insurance policy.
If you’ve taken the time to get into better shape—maybe you’ve quit smoking, lost weight, or have had an improvement in your medical exam—you can most likely apply for a new policy or reclassification to get a lower rate. Many companies will allow you to request a health rating reclassification one time during your term. All you need to do is let your agent or company know that your health has improved and request to be reclassified into a new rate class. Typically, you’ll have to take a new medical examination, but improved results could mean hundreds of dollars in savings.
Just like most companies offer a one-time health reclassification, they also offer a one-time reduction in your coverage amount. Regardless of whether it’s because you’re having difficulty paying your premium, or no longer need the same amount of coverage as when you first purchased your policy, you have the one-time chance to reassess your coverage and reduce the amount of your death benefit.
Most companies have a minimum coverage amount though, so it’s important to keep that in mind when you’re initially purchasing a policy or trying to reduce your coverage.
It might seem counterintuitive at first, but you can band your insurance together to purchase more coverage for less money. Many life insurance companies will offer band discounts, or discounts at a cost per thousand at certain coverage levels. So they may charge a little less per thousand of coverage when you opt for a $250,000, $500,000, or $1 million policy amount. If you find yourself looking at a policy for an amount near those, ask your agent to give you a rate quote for that higher band amount—you may just end up with a 10-25% discount on cost per thousand.
As an example, let’s say you’re a 35-year-old male in the Preferred class rate, looking for a 20-year term life insurance. With one insurance company, you could pay $269 per year for a $200,000 policy, or you could pay $238 per year for $250,000 in coverage. With another company, you could pay $293 per year for $450,000 in coverage, or you could pay $251 per year for a $500,000 policy.
It seems crazy, but it’s a legitimate way to save money. And it’s possible because insurance companies add fees to every policy, regardless of the coverage amount. Many of our clients don’t realize that a large amount of their monthly premium may actually be going towards a fee and not towards their insurance coverage. So if you are paying out a smaller premium every month, you can add a substantial amount of insurance coverage by paying a slightly higher premium.
Many insurance companies offer an 8-10% discount if you pay your premium annually. Sometimes there are discounts semi-annually or quarterly as well. If paying at an interval other than monthly is an option, ask your agent if the insurance company offers a discount.
An Annual Renewable Term (ART) Policy may be a great option if you only need life insurance coverage for a short period of time. It allows you to purchase a one-year term at a lower cost than a typical term life insurance policy. The price you pay is based on a one-year contract, and you are able to lock in a period of insurability, where you can continue to renew the policy annually without reapplying or taking another medical exam. However, your premium will increase from year to year as your age and as the statistical likelihood of your chance of dying increases, even though the amount of coverage stays the same. This is why it’s best for shorter coverage periods and is not recommended if you believe you’ll need coverage for anything longer than a year or two.
When you apply for life insurance, typically the company will determine your age by looking at your “nearest age.” So if you’re 62 years old, but your birthday is in two months, they will determine your age to be 63, and will price you as a 63 year old. However, sometimes you can find companies that will use your actual age in their pricing, even if you are within six months of your next birthday. Being priced at your actual age (rather than a year older) can save you anywhere from 5-12% on your premium.
Another thing some companies may allow you to do is backdate your policy. Through backdating, you can lock in your policy rate at a younger age to get the lower rate. Once you begin your coverage, you’ll have to pay from the effective (backdated) date. So if your policy was backdated four months, you’ll owe the premiums for those four months in order for your policy to go into effect. However, paying a few months of additional premiums is often worthwhile since you’ll be saving 5-12% off the price of your premium for the entire length of your term—which could be anywhere from 10 to 30 years.
Since you know that your life insurance premium can increase 5-12% every year you age, the sooner you buy a policy, the better. Not only does life insurance cost more as you get older, but the older you get, the more medical conditions you may acquire and the less healthy you become. All these factors can put you into a less desirable rate class. So in general, it will never be cheaper to buy life insurance than at this moment.
Oftentimes, life insurance companies have different health requirements and guidelines for seniors, which can change at ages 60, 65, and 70. The guidelines vary, but companies are sometimes more lenient once you’ve hit a certain age bracket. For example, if you’re 59 years old and weigh 210 lbs., you may only qualify for a company’s Preferred rate level; but if you maintain that weight at the age of 61, you may qualify for their Preferred Plus rate, and pay a lower premium—all because you’ve hit their age and health requirements for a “senior.” This works with other medical conditions as well.
While we don’t typically recommend waiting to buy life insurance, there is the possibility you could qualify for a better rate if you wait until you meet a company’s senior age requirement. We can work with you to find the best short-term coverage in the meantime.
When you apply for a mortgage loan or refinance your house, you’ll most likely receive several offers for mortgage life insurance. These types of policies will pay off the balance of your mortgage if you pass away. And since the total you owe on your mortgage will decrease over time, the coverage offered will also decrease.
While good in theory, a normal term life insurance policy, for 30 years or the extent of your mortgage period, will almost always offer lower rates than these mortgage life insurance options.
If your goal is to use your life insurance to cover your mortgage, you’re better off purchasing a 20-year term policy for 130% of your mortgage amount. You’ll get more coverage (since it doesn’t decrease over time), have a less costly premium, and save nearly 20% off the price you would pay if you had purchased mortgage life insurance.
Flipping through channels, you’ve probably stopped on a commercial or two for affordable life insurance for seniors. These advertisements often tout guaranteed acceptance with no medical exam, for as little as $10 a month. With a guaranteed life insurance policy, you’d be paying the same amount as someone with a serious medical condition. Even as a senior, it’s often better to see if you qualify for a traditional term or whole life insurance policy. And if you’re a generally healthy individual, a medical exam will typically work out in your favor to help you pay at a lower rate.
Most experienced independent life insurance agents will be able to find coverage for anyone, no matter their health conditions, even if they are severe issues like cancer, heart disease, organ transplants or strokes. But these more serious conditions will often be covered under a “guaranteed issue” policy, which can cost more money.
However, if your company offers life insurance with a group policy, you are often able to obtain coverage for your preexisting condition at a better price. Group insurance usually has simple underwriting and will only ask a few questions (gender, smoking habits, age) when pricing your coverage. Life insurance policies through your work can also offer coverage that’s one to five times the amount of your annual income, without your medical conditions playing a role in your rate.
There are several financial companies that offer loans to help you pay your life insurance premiums. What happens is they’ll loan you the money to help you pay your premiums for five to ten years. If your loan term ends before you die, you can pay off the loan and will still own your policy; or you can give up your life insurance policy and your loan balance is dismissed, you won’t owe it back. If you die before your loan or term life insurance policy is completed, your policy is used to pay back the loan, and the remaining balance is given to your beneficiaries. Some of these lending firms are very specific in the death benefit amounts they will cover, so this solution may not be an option for everyone.
Not every money-saving tip will work for everyone, and some of our clients have been able to combine a few of these suggestions to save thousands of dollars. If you want the best coverage at the lowest price, you need to work with the best life insurance agency. At Term Life Advice, our agents are licensed, experienced, and knowledgeable. We know the strategies and work with more than 60 top-rated life insurance companies to help you save money. Call us toll free at 855-902-6494, or use our free online quote tool below to get started.