How to find affordable life insurance

Buying cheap life insurance doesn’t mean skimping on coverage. Knowing how companies set premiums can help you find an affordable life insurance policy.

Colin Lalley 1600Amanda Shih author photo

Colin Lalley & Amanda Shih

Published June 29, 2020

KEY TAKEAWAYS

  • A term life insurance policy is the most affordable option for most people

  • Secure cheaper premiums by buying a policy when you’re younger

  • Calculate how much coverage you need to ensure you’re not buying more than necessary

  • Compare quotes from multiple insurers to get the best rates for your health profile and lifestyle

Life insurance is a crucial part of a financial safety net. But in addition to getting the best life insurance coverage, you also want to find an affordable life insurance plan. It may seem like there has to be a tradeoff between finding a cheap policy and a comprehensive one, but there are things you can do to both save money and get the coverage you need.

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Buy life insurance early

Life insurance isn’t usually a top priority for young people, since they don’t have mortgages, dependents, or the same financial responsibilities that older people have. But one big way to help yourself get the cheapest life insurance is to buy early.

Life insurance is almost always cheaper the younger you are when you buy it. Rates rise an average of 8-10% every year you put off applying. Plus, when you buy young, you lock in premium rates for the entire duration of the policy. That means you’ll be paying the same low insurance premiums decades later.

The following tables demonstrates how the monthly cost of a term life insurance policy increases as you age, based on three coverage amounts. Note that average rates for women are generally lower than those for men.

Average life insurance rates by age for men

AGE$500,000$750,000$1,000,000
30$28.73$40.48$48.20
35$30.67$43.30$52.16
40$41.02$58.48$72.69
45$60.88$88.70$113.03
50$94.57$138.68$176.97
55$153.96$225.24$289.64
60$266.74$390.84$504.46

Average life insurance rates by age for women

AGE$500,000$750,000$1,000,000
30$23.02$31.88$37.43
35$25.68$35.90$42.63
40$33.80$48.07$52.72
45$47.53$68.60$86.33
50$71.68$104.60$132.64
55$108.88$159.50$209.21
60$192.52$283.21$361.92

Shopping for life insurance over 50

Even though you’ll get the cheapest premiums if you buy when you’re younger, you may still need to buy insurance later on in life. While it will inevitably be more expensive, it’s still possible to find low-cost life insurance, especially if you’re healthy.

One way to find an affordable insurance policy is to look for a smaller benefit amount and shorter term length than you would if you were buying in your 30s. This doesn’t mean giving up the coverage you need in order to save money. Because you have fewer, if any, dependents, you likely need a smaller policy, like one that lasts until your mortgage is up. You can also look into types of no-medical-exam life insurance, like simplified issue or guaranteed issue life insurance. These allow you to apply for a life insurance plan without getting a medical exam. They can be more expensive than a typical term policy, but they’re still the best option for some older or less healthy applicants because they have less-stringent health qualifications.

Compare and buy life insurance

Compare and buy life insuranceGET STARTED

Buy a term life policy

In almost every case, a term policy is the cheapest life insurance option. It’s also the most straightforward type of life insurance; it provides only a death benefit, without any additional investment components, and it expires after a set period of time.

Because you can choose whichever term length works for your situation, you only pay for the insurance coverage you want. If you’re in your mid-30s, you could realistically take out a 20-year, $1 million term life policy and pay insurance premiums of about $45 per month.

Affordable whole life insurance

Whole life insurance is a type of permanent life insurance, which means it lasts for as long as you continue paying your premiums, with no expiration date. It’s also a type of cash value life insurance with an investment option that gains interest over time.

A whole or permanent life policy can be a valuable tool for some people, especially those who have complex financial situations and would benefit from the cash value. However, the investment component and maintenance fees make whole life insurance six to 10 times more expensive than term life.

If you do want a whole life policy, the best way to find an affordable policy is to compare quotes from multiple insurers and be discerning about the amount of coverage you need.

Long-term care insurance

The majority of people who turn 65 will need some form of long-term care, which costs an average of $138,000, according to the U.S. Department of Health & Human Services. So while a death benefit can help your loved ones after you pass, you may also need to pay for care several years before then.

That’s where long-term care (LTC) insurance comes in. LTC insurance helps you pay the costs associated with chronic illnesses, like Alzheimer’s, that leave you unable to care for yourself. LTC can cover nursing home costs and at-home care if you’re unable to live alone.

LTC insurance can be costly, so ask about a long-term care rider as you look for your regular life insurance policy. Some companies offer standalone LTC plans but they are usually more expensive than a rider and it’s harder to qualify for them.

You can also save significantly by getting LTC coverage in your 50s or earlier. By the time you get into your 60s, adding LTC to your insurance will cost you thousands more.

Supplemental group life insurance

Another way to keep a personal life insurance policy affordable is to supplement it with employer-provided coverage.

Group coverage through a workplace is a common benefit that you can get at little or no cost. The downside is that it usually won’t provide enough coverage for all your needs and it’s tied to your employment.

But while an employer-provided group policy isn’t enough on its own, it can supplement a private policy. If you’re able to get, for instance, $50,000 worth of coverage for free, you can consider lowering your private policy (and thus your monthly premiums) slightly to make it more affordable.

Get the right amount of coverage

It’s easy to overestimate the amount of life insurance you need and buy too much, raising the cost considerably. But it’s also easy to underestimate how much you need, potentially leaving your beneficiaries without support when you’re gone. A good rule of thumb is that the insurance you need is equal to 10-15x your salary.

Consider all of your financial obligations when choosing a benefit amount and term length. Always take the following into account:

  • Existing debt, like a mortgage or student loans
  • Future college plans (for you, a spouse, or a child)
  • Dependents, including children and aging parents
  • Any financial cushion you want to leave behind
  • Final expenses, like end-of-life medical care or funeral costs

Consider the ladder strategy

Your life insurance needs decrease over time: your mortgage debt decreases, you need to provide for kids for less time, and so on.

By using the ladder strategy, you can get the coverage you need now while ensuring you’re not paying for coverage you won’t need later in life. With the ladder strategy, you buy multiple policies of varying coverage amounts and term lengths. As the decades pass, some policies will expire, and at the end you’ll be paying for a small policy that covers your current needs and nothing extra. You can spend up to 50% less on life insurance by laddering smaller policies versus buying one larger policy.

Understand the underwriting process

Life insurance companies largely set the price of policies through the underwriting process. This is where they determine how risky an applicant is to insure by using:

  • Your current health and medical history. This is done primarily through a paramedical exam and a request for documents from your doctor.
  • Motor vehicle reports that show your driving record.
  • A phone interview with you to find out if you have any dangerous habits (like smoking) or hobbies (like rock climbing).

At the end, the underwriter assigns a classification to you that determines your policy cost.

There isn’t anything you can do to change what happens in the underwriting process, but knowing beforehand what insurance companies look for can help you take steps to lower your insurance costs. For example, a health condition like diabetes can result in more expensive life insurance. But if you can show you’ve taken steps to manage your condition, like taking the proper medication, insurance carriers may lower your premiums.

Choose the best life insurance company for your situation

Life insurance companies use your health to determine your policy cost, but not all carriers treat health conditions the same way. One common example is that certain companies offer better pricing to former or current smokers. That may also include better life insurance premiums for marijuana smokers.

Certain companies also offer cheaper premiums for people of certain ages, military personnel, high-net-worth individuals, recovering alcoholics, those who recently lost weight, people with high blood pressure, or individuals with certain types of cancer.

These differences between companies are why the best life insurance company for you is usually the one that is most accommodating to your health situation. Going with the wrong one can cost you thousands of dollars over the decades you own the policy.

Compare quotes

Taking all of the above into account — coverage amount, type of policy, company differences — can feel overwhelming. But if you want the best insurance rates, it’s also crucial to compare quotes for different plans. Comparing life insurance quotes can save you up to 40%.

The easiest way to quickly compare quotes from multiple insurance carriers is with an insurance broker. Otherwise you will need to do all of the above — figure out what type of insurance you need, the death benefit size, which company is best for a given health situation, and more — and then go to each company individually, write down their offers, and compare manually. And if you do it manually, you’ll still need to apply through the insurance carrier, another thing a broker can manage for you.

Don’t be afraid to use a broker

It’s a common misconception that you can save money by buying directly through an insurance company. Using a life insurance agent or broker does not come with additional costs. Life insurance rates are highly regulated, so the same policy cannot be offered at a discount by some parties or marked up by others.

You will pay the same amount for an individual policy whether you buy from the carrier or use an independent broker. Additionally, independent brokers can help guide you through the process and answer questions you may have about how certain policies or companies compare.