Most people wonder how to save money on life insurance. It makes sense that you want to get the most coverage possible for the least amount of money.
There are some simple ways to lower the cost of your insurance, whether you’re shopping for the first time or already own a policy.
Save on life insurance when buying a new policy
If you’re shopping for a new life insurance policy, these steps can help you get the insurance you need at the lowest possible price.
1. Buy life insurance as soon as you know you need it
The sooner you purchase life insurance, the lower your price will be. As you age, the average cost of life insurance will increase 4.5% to 9% every year. Setting up life insurance when you’re young and healthy can lock in lower rates and save you a lot of money over the term of your policy.
2. Shop the market
Each insurer uses its own internal guidelines to evaluate your application and set a price for your coverage. Depending on which company you apply with, the cost of your insurance could vary widely.
When you work with a marketplace like Policygenius to find and buy insurance, experienced agents help you choose the company that will be the best fit for you, ensuring that you get the best price. Some insurers, for example, offer better rates for people with diabetes, or people who have a history of cancer, or people who have had mental health diagnoses.
3. Choose term life insurance
The most impactful way to save money when buying life insurance is to choose a term life insurance policy instead of a permanent life insurance policy. Permanent life insurance costs significantly more than term life insurance. This is because term life insurance is simple and easy to manage: You pay premiums for a set amount of time, and if you die during that time, your beneficiaries get a guaranteed amount of money. Permanent policies are more complicated financial products that can be useful for complex situations (like if you have certain estate planning needs). Most people can have their financial protection needs met with term life insurance.
Learn more about term vs. permanent life insurance
4. Lower the face value and/or the term length of your policy
If you apply for a policy that delivers your ideal coverage, but the rate the insurer offers you is too high, you can lower the death benefit and/or the term length of the policy in order to lower the cost of your premiums. Your agent can help you find a sweet spot with the most coverage and longest term possible at a premium you can afford.
5. Pay your premiums annually
By paying your life insurance premiums annually instead of monthly, you can sometimes save up to 5% on how much you pay.
Lower your current life insurance premiums
If you already own a life insurance policy, there are three things you can do to reduce how much you’re paying for your coverage.
1. Work on your health, then ask for reconsideration
Your life insurance rates rise as you age, but if you show signs that you’ve been working on your health since you bought your policy, you may be able to actually lower your rates. A reconsideration, also called rate reduction or re-rating, is when you ask your insurer to consider lowering your rate based on an improvement in your health.
You’ll be eligible to ask for reconsideration after your policy has been in place for at least one year. You’ll have to take a new life insurance medical exam, and the insurer will also want to see at least one year of progression in your health records from the time your policy was active.
In certain situations, you may want to wait even longer to ask for reconsideration. For example, smokers pay a lot more than non-smokers for life insurance. The further away you get from your last cigarette, the higher the likelihood that you’ll receive a lower life insurance rate. Generally, life insurance companies will consider you a non-smoker five years after you’ve successfully quit smoking, though each life insurance company uses its own guidelines.
If you apply for reconsideration and your insurer is unable to give you a lower rate on your policy, you’re still covered at the same rates that you were paying before. The insurance company won’t increase your rates or cancel your policy. If your reconsideration is denied and you still want lower rates, you can apply for a new life insurance policy with a different insurer to see if you can find lower rates elsewhere.
2. Re-shop your policy
While you’re applying for reconsideration with your current insurer, it may also make sense to re-shop the market for your policy. Your improved health condition could mean that you’d be eligible for an even lower rate from another insurance company.
If you haven’t improved your health since you first applied, it likely doesn’t make sense to ask for reconsideration, but it still might save you money to re-shop for life insurance, especially if you didn’t thoroughly shop the market when you originally purchased your policy. It’s possible there’s an insurer who will be able to give you a better rate based on your current health and lifestyle profile.
3. Reduce your coverage amount
If you’ve had your policy for at least one year, you may be able to ask your insurer to lower the coverage amount of your policy, which would in turn lower your premiums. This is not ideal for most people; you bought the coverage you have because it’s the amount you need. But if you’re considering forfeiting your policy unless you can lower your premiums, this could be a good way to keep at least some coverage.
Frequently asked questions
How can you lower your life insurance rates?
You can potentially get lower life insurance rates by comparing quotes from multiple insurers, improving your health, or lowering the amount of coverage you have.
What is life insurance reconsideration?
Reconsideration is when your insurer offers you new, lower rates because your health has improved. You’re only eligible for reconsideration after your policy has been active for at least a year.
What is reapplication in life insurance?
Reapplication is when you apply for a new life insurance policy from a different insurer so you can get lower life insurance rates. If you apply with another company, you’re not obligated to accept a policy with it, especially if it’s not better than your current policy.
