So, you already convinced yourself to go ahead and buy life insurance because your uncle or your sister or your friend just got their insurance license and you feel obligated to help out with some new business. There are many articles online that offer great advice on how to save on life insurance premiums by improving your health, losing weight or buying sooner.
While I think these are valid points, they don’t help a 70-year-old who wants to buy life insurance now (instead of at age 30) or a smoker who doesn’t want to stop his bad habit. In this post, I will reveal the five unique ways you could save money on life insurance. Let’s dive in!
Related: Finding cheap term life insurance
Life Insurance Rate Bands
Every life insurance company has a few rate bands they use to calculate premiums. Most companies have 1 to 5 bands, and each band represents a price per $1,000 of coverage. For instance, the first band is typically the most expensive and has a range of $25,000 to $99,999 in coverage. Band two has a range of $100,000 to $249,999, band 3 has $250,000 to $499,999, etc.
All companies have different band ranges, and the trick is to run all quotes and compare them against each other because one company can have the first band from $25,000 to $250,000 while another may have two bands instead of one for that range. This way you can increase your coverage and pay less. Too good to be true, but check out the screenshot below.
Check out This Example
The example below shows a 40-year-old male who purchased a $75,000 20-year term policy for $13.85 per month. If he only knew that a $100,000 20-year term would cost him $10.92 per month with a different company (because of a different rate band), he would probably be upset with his purchase.
Related: Sample life insurance rates
Underwriting Credit Opportunities
I’m sure you know that the premium you are getting is in direct proportion to your health. The healthier you are, the less you would pay, and vice versa. What you may not know is that there are a few companies out there, such as Banner, AIG, and Prudential, who will knock off a few rating classes if you can show improvement in other areas of your life (such as optimal cholesterol levels or blood pressure).
For instance, if you have type 2 diabetes, the underwriter may use your normal build (if you are not overweight) and cholesterol to improve your table 2 rate (which you would have gotten by being diabetic) to a Standard table rating, which can translate into hundreds per year in savings.
Never Skip the Exam
Yes, I’m sure this will create a controversy between some of my insurance colleagues. But the reality is that you are paying extra for the convenience of not taking the exam, and although this may be appealing for some, you need to keep in mind that sometimes you are paying 50% or more, depending on your age and health, of course.
This may not be an issue if you are under the age of 40 and want to skip the exam, it may only cost a few dollars per month. The reality is irrefutable, however: the insurance company is taking a higher risk by not looking closely (doing a paramedical exam) at what they are insuring, so you will pay more.
So if you are not scared of needles and don’t need a policy tomorrow, avoid a no-exam life insurance policy and take the exam. You will pay less and will also have more options when it comes to death benefit amounts, policy types, and term lengths.
Choose the Right Company for Your Health Condition
I hate to break it to you, but unless you are a broker in the insurance industry, you probably will not be able to accomplish this by yourself. The reason is that the underwriting guidelines are not shared with the public, they are the property of insurance companies and are only shared with professionals in the industry.
So let’s say you are shopping at Costco and find out that they offer a life insurance policy. You think to yourself, “Costco has a good reputation and low prices, I’m sure they have the perfect policy for me.” What you may not know is that they offer only one company, and because you have a few health conditions (who doesn’t), you are stuck with only one option and will end up paying more.
You may even think, “all companies will do that, right?” Wrong, choosing the right company will not only save you money but sometimes will be the only way for you to get a policy. Matching you with the best company is the job of an insurance broker. Choose your broker wisely.
Don’t Work with an Agent Opt for a Broker Instead
I saved the best for last. Instead of wasting time looking for life insurance deals online, look for a reputable broker and work with him or her. Prices are fixed by law, so whether you buy a policy from AIG directly or buy through this website, you will pay the same. The difference will be that you will be presented with more options, and will have someone on your side to guide you through this process.
The good news is that the broker’s help is free and your policy will cost you the same either way because insurance brokers get paid by the insurance company. The other point is to work with a broker, not an agent. An agent represents only one company, which is why we call them a “captive agent.” (they belong to the insurance company) They may have all the right intentions but at the end of the day, they can only offer you one company.
Agents who sell New York Life policies are captive agents—they are not allowed to sell any other company but New York Life. A broker has no loyalty to any specific insurance company, and instead, his/her commitment is to the client – you!
There are a few other savings tips, such as paying your policy annually instead of monthly, not buying a guaranteed issue policy, not buying more than you need, or just getting a term policy.
As I said before, all of these are valid points, but by choosing the right broker, all of these (and other tricks) will be disclosed to you, so that you can make an informed decision about your life insurance policy. You can run the quotes on this page.