Bankrate lists six ways to trim life insurance costs as follows:
1. Shop around.
2. Get the right size.
3. Find the right kind of coverage.
4. Verify the company is sound.
5. Get some professional help.
6. Ask for a payment plan.
My thoughts on these:
1. Shopping around for anything is always a good idea and shopping around for something you'll have for 10 to 20 years is almost mandatory.
2. I would cut a lot of other expenses before I cut down on life insurance. That said, make sure you get only what you need. Your family isn't supposed to jump up three economic classes when you die -- they're supposed to maintain their current standard of living and be able to achieve planned for financial goals.
3. Personally, I like term as well, and even my agent has said that cash value probably isn't the right fit for me.
4. If you get a fantastic rate from a company that goes bankrupt in two years, you're not saving any money. Even worse, you may find yourself unable to insure yourself (for whatever reason) if a company goes down.
5. I got a great price online for my insurance and then told an agent I knew that I'd go with him if he could do the same or better. He called the company and was able to match the price, so I got the price I wanted along with the support/advice of an agent (who's also a good friend.)
6. My insurance company charges more if we pay in installments, so we pay in one annual amount. Your mileage may vary.
I think it misses an important aspect of lowering costs that is in our control - taking care of our health & lifestyle (maintain right weight & general health, no smoking, drugs, excessive alcohol etc.). I'm sure these factors influence the price significantly and ignoring them would be "penny wise and pound foolish".
In fact, payment options are a significant factor in cost - where I live, there is an option for single premium (one-time lump-sum payment) in many term plans. This brings down the cost significantly because the commissions are too low (2% instead of 35%/7.5%/5% in regular plans), lapsation probability is 0 and you get discounted rate based on time value of money. Definitely something to consider if you have cash.
Posted by: Param Iyer | March 17, 2009 at 12:45 AM
I like your points.
Term rocks. Get quotes every few years......the rates have decreased even though you've gotten older!
Posted by: Neal Frankle | March 17, 2009 at 01:59 AM
Param lyer,
Great point. Bankrate forgot the biggest differentiator in price, health and lifestyle.
On the term rate brochure I have on my desk, the rate for the best nonsmoking class for a 40 year old male is only about 25% of the worst smoking class.
Stop using nicotine, lose some weight, get your blood pressure under control, etc. and you can save some serious money.
Posted by: Michael @ The Life Insurance Insider | March 17, 2009 at 11:29 AM