5 surprising ways to save on life insurance

By Chris Couch Posted : 02/14/2011

Life insurance surpriseThe younger and healthier you are, the less you’ll pay for life insurance. But even if you’re not so young and not so healthy, there are still ways to lower your life insurance rates.

Here are five surprising strategies that may help you to land cheap life insurance.

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Look for life insurance volume discounts

While you're comparison shopping for life insurance quotes, inquire about volume discounts, says Debbie Cecil, director of product and market development for Unum in Chattanooga, Tenn. Life insurance companies price policies according to coverage "bands."

For example, a life insurance company may charge one rate per $1,000 worth of coverage for policies worth $10,000 to $100,000, and a lower rate per $1,000 worth of coverage for policies of $100,000 to $200,000.

If you're eyeing policies on the cusp of these ranges, you’ll get more value simply by upping your coverage.

"Because of the way banding works, $100,000 worth of coverage could cost less than $90,000," she says. "It's worth your while to ask."

Consider buying life insurance early

If you have dependents, consider getting life insurance now. It could save you a bundle in the future.

You'll pay approximately five times less for life insurance annually if you purchase a plan in your early 20s rather than waiting until your late 50s to buy, according to Karrol Kitt, an associate professor of personal finance at the University of Texas, Austin, and a consumer representative for the National Association of Insurance Commissioners.

However, affordable premiums don't necessarily make life insurance the best place to spend your money if you're young.

"Young people do pay less, but if you don't need [life insurance], invest that money," says Kitt. "The return you'll get with your money in [an investment vehicle] is going to be more than the higher premiums you'll pay later."

Investigate survivorship life insurance

Want to cut your life insurance costs by one-third? Consider survivorship life insurance, Kitt says.

Survivorship life insurance provides joint coverage for married couples and pays a death benefit once both you and your spouse have died. Your heirs can use the benefit to pay taxes and estate costs, or can bank the funds.

Kitt says survivorship policies make the most sense if you and your spouse don't need to leave money to each other. They also are appropriate if you're part of a high-income household and want to provide funds for your beneficiaries to pay estate tax.

Pay annually for your life insurance

Many life insurance companies offer a discount if you pay premiums on an annual or semi-annual basis.

"It's more expensive for a company to mail a monthly premium statement," says Cecil, adding that paying for a year's worth of insurance usually knocks 5 percent to 6 percent off your bill.

"Some companies will offer a discount of 1 percent if you go [with] automatic bill pay," Cecil says.

Before paying for a year's worth of insurance, make sure you can swing it. Saving 6 percent doesn't make sense if you have to pay a late fee on a different bill or charge your insurance on your credit card.

Fix yourself and cheap life insurance will follow

Life insurance premiums come in a variety of rates, from "super-preferred" for those in excellent health to "highly rated" (higher rate of risk for a claim) for those with chronic medical conditions, says Kevin M. Lynch, an assistant professor of insurance at The American College in Bryn Mawr, Pa., and author of "Fundamentals of Insurance Planning."

Rated policies are more expensive – anywhere from 50 percent to 500 percent more depending on the nature of the condition. In certain circumstances, premiums can be reduced if a policyholder can prove that his or her health has improved.

"Companies will sometimes make adjustments for things like diabetes if it's been controlled, high blood pressure, cancer if it's been [in remission], even obesity if the weight gets corrected," he says.

In these instances, companies require significant periods of demonstrated improvement, ranging from one to five years, sometimes longer.

Once a medical issue is corrected, it's up to you to let the insurance company know, Lynch says.


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