In this 2010 Life Happens article, William Rowan shares some helpful tips to make sure your wallet is not too tight due to life insurance costs.
Nobody likes to pay more money for their life insurance than need be. Everybody knows that life insurance gets more expensive as you get older, but there are strategies that can help you save money on your policy. Here are a two tips that could help you to save thousands of dollars over the life of your plan.
1: Figure out how the insurance company determines your age.
There are two ways that insurance companies factor your age when you apply for life insurance. Your age will be determined either by using your actual age, or by using your age nearest. If they use your actual age and you are 44 years old, then they will use that age as the basis for your life insurance rates.
It is more common for companies use a process that is known as age nearest. This calculation is simply determined by seeing if you are closer to your next birthday, or your previous one. Using this method, if you are turning 45 in three months, the insurance company will give you the rates for a 45-year-old, which are more expensive than those for age 44. As a result, you may be able to save money if you choose a life insurance company that chooses your actual age if you are coming up on a birthday soon.
2: Backdate your life insurance policy.
Another age-based strategy you can use to save money is to backdate or save age on your life policy. Using the example above, if you were turning 45 in three months, most companies would rate you as a 45-year-old. However, did you know that you could qualify for age 44 rates?
If you paid three months of back premiums, which would make your policy date nearest to your last birthday, the insurance company will actually give you the life insurance rates for age 44! This could result in some substantial savings over the life of your policy since you are essentially paying the term life insurance rates for an age that is one year younger.
For example, let’s say that the insurance cost for age 44 was $1,200, and the premium for age 45 was $1,300. You have the option to pay three extra months of premium, or $300, to save the premium from the previous year, thereby saving $100 off of your annual premium. It may not sound like much, but using this strategy would save you $100 a year for every year of a 30-year term plan, you would end up saving $2,700 over the life of the policy.
You can save some money on your life insurance policy simply by implementing certain age-based strategies. They will not be options for everybody, but if they do match your goals, the savings can be substantial. Be sure to check out the information that the nonprofit LIFE Foundation has for choosing the best type of life insurance for your situation.
Many people don’t know that you can sit down with an insurance agent and talk through your needs at no charge—and no obligation. If you’re feeling overwhelmed, why not reach out for professional advice? Our concierge service center offers this service at no cost.