When most people go to buy life insurance, they get a couple of quotes and whichever one comes in cheaper, they choose.
They think they are saving on life insurance.
But the truth is getting more than one quote is common knowledge and just scratching the surface of all the ways you can save.
I've got you covered!
In my 16-year career, I've learned over 100 tips and tricks - including some really lesser-known ones - to save on life insurance.
So whether you are new to life insurance or already have a policy, use these strategies and you'll find you can save as much as 70% or more on life insurance.
The least you should know about saving money on life insurance. More advanced techniques will follow after this section.
Know the game - It's all about Rate Classes (25% Savings)
The #1 way to save on life insurance is to understand the following statement. "You will save the most money by applying to the company who gives you the best rate class."
Here's what I mean. Companies have health rate classes like Preferred Plus, Preferred, and Standard. (There are many more.)
They place you in a rate class based on risk.
Factors that affect your class are things like:
- health / medications
- driving history
- family history
- and more
Usually there's a 25% premium increase between each class.
Your job is to apply to the company where you get in the best health rate class.
For example, let's say you take medication for cholesterol. Some companies will allow you in their top rate class while others will dock you a health class.
Assuming their pricing is about the same in all health classes, you'd pay 25% less by applying to the right company, the one who allows you in their best class with your medication.
LIFE INSURANCE MADE EASY
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Use an Independent Life Insurance Agent (10% to 70%)
A lot of people don't realize if they get a quote from certain companies like Ladder Life or State Farm, they will only get a quote from that company.
Since, as we discussed, every company has different underwriting guidelines, it pays to speak to an independent agent. They can shop from multiple companies to find you the best rate based on your specific circumstances.
Disclose All Health Issues Up Front to Your Agent (25%)
This allows your agent to take your case to the company who will be most lenient. There's nothing worse as an agent than selecting the perfect company for a client only to find out later about a health issue. Typically when that happens, a different company would have been more suitable. It wastes a lot of time and costs the applicant money.
Take a Medical Exam (20% to 50%)
Online Fintech companies who will insure you in 10 minutes without an exam are all the rage right now. It's SO dang convenient!
Unfortunately, you'll pay a premium (pun intended) for the convenience. If you take a medical exam, you give the insurance company a lot more informaation about your health, which lowers their risk. This typically results in lower premiums.
Occassionally, an exam can work AGAINST you, however, which leads to our next tip.
Get a No Exam Policy in Place Prior to Applying to a Company Who Requires an Exam (25%+)
One of the problems with taking an exam is you are never 100% sure how the results will come back. Could your cholesterol come back high? What if you get nervous and your blood pressure reads high? What if there's something going on in your body you don't even know about like elevated kidney or liver function numbers?
If the numbers are bad enough, it could cause you to get a lower rating or even declined. That's why, unless you are pretty sure you're in great health, or perhaps even had some recent labs done, you may want to get a no exam policy in place first. Once it's in place, you could try the exam route for a lower premium and replace the no exam policy. But if anything weird pops up in your labs, at least you've got the no exam policy as a backstop.
Know WHERE to Get Multiple Quotes (25%+)
Ok, I admit getting multiple quotes is not a lesser-known savings "hack."
Knowing where to get the quotes does make a big difference, though. When you get quotes, be sure to use an independent agent (they can shop from multiple companies making your job a lot easier). Also be sure to get a quote from your home/auto agent (sometimes there are deep discounts here). And if you work for an employer who offers group coverage, be sure to check how much it costs to be added there. If you have some health issues, group coverage is often a great way to get coverage for less than you could in an individual policy. More on these tips is coming down further in the article.
Last, if you have a family member or friend in the business, don't just rely on them for the best deal. Go ahead and get a couple of quotes from other sources as well.
Ignore Most Mailers from Your Credit Card Company, Bank/Credit Union, AAA, and Costco (15-30%)
When you get an advertisement in the mail from your credit card company or bank, it's typically a group life insurance and/or no exam plan. These are easy to buy, but remember, you'll pay a premium for the convenience.
Remember, if you don't have any coverage, it could be a good idea to get a no exam or group plan in place before going the fully underwritten route.
Buy While You Are Young (20-40%)
I've had clients purchase life insurance in their twenties who are not yet married and have no children. If that sounds crazy, I assure you it's not. They wanted to "lock in" their rates when they were young and healthy. You never know if put off life insurance, if some health condition will prevent you from buying it in the future at an affordable rate.
Buy Today, Don't Wait (5-8%)
Although the titles sound similar, this is not related to the tip above.
Most people don't realize that every year you wait to buy life insurance, it gets more expensive. It increases around 5% in your 20's and 30's, then 6% in your 40's and continues on up as you age.
What I mean is, it costs a 45 year old about 6% more to buy the same policy that the 44 year old can buy.
Not only does every year count, but every day and month counts. Remember our tips on nearest age and actual age? Apply today because you'll literally never pay as little as you will today.
Set up Auto Pay (1-2%)
For companies who accept monthly checks, they would much prefer you get on an automatic bank draft. This way you are much more likely to keep up with your premiums.
Annual Pay / Quarterly Pay / Semi-Annual (Up to 8.75% Savings)
Most people pay their premiums monthly. If you can afford to pay annually, most companies will give you a premium break of around 8% or more. They'll also give a smaller break if you pay quarterly or semi-annually, but it's usually still less than monthly.
Saving on Term Life Insurance
15 tips to help you save 10% to 70% on term life insurance
Buy a Shorter Term Length (10% to 30%)
If you're buying term life insurance, you need to understand that 10 year term costs the least and 30 year term costs the most. If you're being quoted a longer term, be sure to check out 10 and 15 year rates as well.
Buy Decreasing Term (10-15%)
You'll have to ask your agent about this. There aren't a lot of companies who sell decreasing term. But the basic idea is your death benefit decreases over time rather than staying level, as it does in traditional term.
Since your benefit is decreasing, it obviously costs less than a plan that offers the same benefit for the duration of the term.
These plans can be good for paying off debt. They're also known as "credit life insurance." The idea is as you pay down your debt, you need less coverage.
You can also achieve a similar decreasing effect by laddering your term maturities or getting a Protective Custom Choice UL. See tips #8 and #41 respectively.
Pre-existing health conditions?
Don't worry. AIG Direct specializes in insuring people just like you. From high blood pressure to diabetes, AIG Direct has seen it all and has the absolute lowest rates. Click below to see if you qualify.
Quotes are quick, easy, and free!
Check Life Insurance Off Your To-Do List
Our top 10 picks for quick, convenient life insurance coverage. Our favorites are the "no-exam plans" with great rates up to age 60.
Quotes are quick, easy, and free!
Buy a Convertible Life Insurance Policy (25-50% Future Savings)
The convertibility feature allows you to upgrade your term policy to a permanent policy without proof of good health.
Imagine that you're 16 years into a 20-year term and you realize you want to keep your policy for life. The only problem is it's going to expire in 4 years. And you've had some heart trouble since you first got coverage.
This type of situation leads to some humorous jokes by my clients like, "Well, I guess that means I better die in the next 4 years!"
But there's another option, thank heavens.
If your policy is convertible, even if you have a bad heart and couldn't necessarily buy a new policy today, you could convert your old term policy into a permanent plan, no health questions asked!
Imagine the savings on your second policy if you were got a great health rating your first go around. Converting your policy could mean paying preferred rates down the line rather than standard rates or worse!
Ladder Term Lengths (10% to 30%)
Let's say you have a 30 year mortgage for $500,000.
Instead of buying a 30 year term policy for $500,000, you could save 10% to 15% by buying two policies. One 20 year term for $250,000 and a 30 year policy for $250,000.
You don't need the $500k for the entire 30 years since you'll be paying down your mortgage balance. By mixing in a 20 year term policy - shorter terms cost less0 you'll save money.
Annual Renewable Term (15-30%)
Earlier, I said that the shortest term was 10 years. That's true for what is known as level term.
You can actually get a 1-year term with some companies however. The rate simply renews (increases) every year.
If you need coverage for a very short period of time and don't mind your premiums increasing annually, you might consider annual renewable term.
Buy a Term Policy without a Conversion Feature (5-10%)
A conversion feature allows you to convert a term policy to a whole life or universal life plan at a later date without evidence of good health.
Say you buy a 20 year term and 15 years later you realize you're going to need coverage for a lot longer than 5 more years. But your health has deteriorated.
That's the perfect scenario where someone would want to convert their policy to a lifetime policy. The nice thing is they'll be able to do so at the original health rating they received when they first bought their policy, no health questions asked!
But you do pay a bit more for this and not everyone will use it or need it.
Other companies might offer two versions of term products, one with and one without a conversion feature.
For example, Ohio National has two types of term plans, their Term and Term Plus plans. The plus plan has better conversion features than the standard term plan but costs a bit more.
Save on permanent Life Insurance
15 tips to help you save 10% to 70% on cash value life insurance, also known as whole life or universal life insurance
Set Whole Life Insurance Dividends to Pay Premium (10-20%)
If you have whole life insurance that's paying dividends, many people use them to buy "paid up additions." This is a great option but if you're struggling to pay your premium, you can also have your dividends go toward your premium. Contact your agent to set it up.
Buy Guaranteed Universal Life Instead of Whole Life (20-50%)
These are two different products and work a bit differently. Both are permanent plans potentially offering coverage for life but the key differences are:
- Guaranteed universal life (GUL) costs a lots less! (20-50% less)
- You will get little-to-no cash value build up in GUL
People buy whole life for a combination of life insurance and cash value accumulation. If all you need, though, is affordable lifetime coverage and don't care about the investment component, stick to GUL!
Buy Term Life Insurance Instead of a Lifetime Policy (50% or more)
For people who are simply trying to get some life insurance protection for the next 10, 20, or 30 years, a term policy will do fine.
It's usually about 5% to 25% the cost of a permanent plan like whole life insurance. Just realize that term expires with no cash savings in it and no money back. But most people don't expect money back from insurance anyway.
All I personally have is term. If you need life insurance for estate planning or charitable giving, or a few other special circumstances, you might consider a permenant plan. Otherwise, save yourself some money and buy term.
Life Insurance "As an Investment" Is NOT a Savings Strategy (70% to 90%)
Many people buy whole life & universal life are for lifetime coverage as well as for an investment. You must understand that is a strategy to help you supplement your retirement income. It's not about saving money; it's about growing money. So you would never buy one of these policies to save money on life insurance.
Health Related Savings Tips
Much of life insurance pricing has to do with health, but there are many tricks to manipulate the price you get
Shop by Your Exact Health, Family History, and Build (25-50%)
The real trick when it comes to life insurance savings is not finding the company who QUOTES you the best rate, but the one who will actually approve you with the best rate.
One of the ways to do this is to look at the company's underwriting guidelines. If you like a particular company, you can do a Google search for their name and underwriting guidelines and typically find out all sorts of goodies about who they accept into which rating class.
Get a "Quick Quote" or "Soft Offer" before Applying for Coverage (25%+)
Have a tough medical condition? Been turned down of coverage or you're paying too much? Ask your agent to send a letter about your health to multiple companies asking how they would rate your health.
Note, this works even better if your agent includes health records but they don't have to. You'll find that companies come back with an assortment of offers. They are tentative based on seeing your complete medical record and blood work, of course, but they tend to stick to these tentative offers unless something is grossly misrepresented about your health.
In short, let them compete for your business and save!
Comply with All Doctor Recommendations (25%)
For some reason, people think it helps their chances of getting cheaper life insurance if their doctor prescribed a medication or treatment plan and you are feeling so great now that you are no longer following the plan.
I see this all the time with CPAP machines for sleep apnea. "Oh, I have a CPAP but I don't need it so I stopped using it."
That might sound like a great thing to you but it's a red flag for insurance companies. If you feel your health has changed and you no longer need that high blood pressure medication or CPAP machine, you need to visit your doctor and have them note it in your records that they are ok with you stopping. This way you are compliant with thier wishes. That's what insurance companies like to see!
Exclusive Rates Offered by Health IQ If You're Really Healthy (5-10%)
Health I.Q. is an agency that has only been around about 6 or 7 years but has made big waves in the life insurance space. They raised millions of dollars and spent it doing research on the correlation between people who exercise regularly (swimming, biking, running, etc) and its effect on life expectancy. They then took that research and used it to negotiate better rates with insurance companies exclusively for Health IQ’s clients, who they could prove are very active.
While they are a newer agency, they are a big company, and offer products from many of the most reputable, oldest life insurance companies in the U.S. They would be best for someone who wants the absolute best rate anywhere, if they exercise regularly and can prove it. They are especially good at helping avid:
Process: Requires speaking to an agent over the phone or by email. An agent is assigned to the client’s case and sends application, usually by Docusign. Most policies require an exam, and typical case takes 4 to 8 weeks to be approved and go “in force.”
Strengths: Health I.Q. truly fights for health conscious individuals. For example, people who eat low carb may have higher cholesterol, but Health I.Q.’s companies are a bit more lenient on them since overall they have a lower life expectancy. Many people who exercise regularly are quite muscular. This could mean an applicant may actually have a high BMI or height/weight ratio, even though they are in excellent health. Health I.Q. works with companies to add in a BMI buffer to account for their muscles.
They are also an independent agency, so they can do many of the same things as an independent agency like AIG Direct. The difference is Health I.Q. has negotiated actual lower rates with at least 3 of their carriers, Ameritas, SBLI, and Assurity (maybe more now). That means you can actually get a BETTER rate with these companies if you go through Health I.Q. than any other agency or even if you went to these 3 companies directly. These top rates are exclusively offered through Health I.Q.
Lose 5 lbs (25%)
People don't realize how insurance companies place them into rate classes. One way they place them is based on height and weight. Say you're 5'10 and weigh 190 lbs. That might be a preferred class (2nd best health class) for several companies whereas you can get the best class if you weight 185 lbs.
If you already have a policy, ask how much you have to lose to get into a better class. If you're getting a policy and can't qualify for the best rate based on your build, ask your agent how much you need to lose to get into a better class. Often it's just 3 to 5 lbs!
Lie on Your Application - Not Recommended! (25% to 50%)
I'm just adding this here to tell you that some people with health concerns use this strategy to try to "save" on life insurance and why you shouldn't. It can work in the short term but can also bite you in the butt. I want to explain both sides.
Let's say you quit smoking 6 months ago. You consider yourself a non-smoker. When you go to apply for life insurance, most applications will ask if you've used any tobacco products in the past 12 months.
Here's the rub.
If you answer yes, you'll be answering honestly but you'll likely be classified as a smoker and pay double the non-smoker rate. A lot of people lie in situations like this.
If you answer no, you'll be lying but the company probably would not find out. (Note, in some cases they may see tobacco use in your medical records or in an MIB hit -more on MIB later - and they may find out anyway). But a lot of people would take a medical exam and test negative for nicotine in the urine and could technically "get away with it" - at least at first.
Here's why I don't recommend this, besides the clear fact that it's immoral.
First of all, this is technically a form of insurance fraud. If you're intentionally witholding or lying about material information on an insurance application with the goal of fooling the insurance company, that's an actual crime!
Most of the time, if the insurance company finds out, they'll simply deny your application rather than take legal action. But I suppose the latter could occur.
Second - if you get caught, the company could "contest your life insurance claim."
Say you did lie and got away with it. You are happy paying your non-smoker rates and you go on living thinking you pulled one over on the insurance company.
A year after getting your policy, you die in an accident.
If you die within two years (for some companies or in some states this may differ), most companies will launch an investigation prior to paying your death benefit claim. In this investigation, they could send what's called an insurance investigator or adjuster to interview your friends or family or check out your Facebook page to be sure you were honest on your application.
Let's say multiple friends and family (and Facebook pictures) prove you were a smoker for years and had just recently quit when you applied for coverage. They could feasibly reject the claim and not have to pay out.
Cut Current Policy Costs
Already have a life insurance policy and want to save money? We've got you covered in this section.
Reduce Your Death Benefit (10%+)
If you have a policy and are truly struggling to pay the bill, please don't cancel it. You might consider lowering the death benefit. Most companies will allow you lower it to a minimum of $50k or $100k.
Get Healthier Then Reapply for Coverage (25% to 50%)
Do you have an existing policy that you purchased when you weren't in great health. If you've improved your health, you can often apply for a rate class adjustment (most companies allow this once during a policy). Say you've worked to lower your cholesterol or gotten off a medication (under doctor's supervision, of course), you could save 25% or more by moving into a better rate class.
Stop Smoking (50%+)
Same idea here as the tipe above. If you've quit for a full year, apply for a new rate class adjustment. Smoker rates are often double non-smoker rates (or more) so it really pays to have your policy re-assessed if you've quit.
Related: If you smoke marijuana, pipes, cigars, or use chewing tobacco and are paying smoker rates, we know of some companies who may able to classify you as a non-smoker. Give us a call at 888-681-4952.
Trade in Whole Life for Guaranteed Universal Life (20% to 50%)
For people who own a whole life insurance plan, you can typcially save up to 50% on your premiums by moving your cash value over to a guaranteed universal life plan. You won't get the same cash value accumulation (in fact you may not be able to access any future cash from your policy) but if your concern is more about affordable premiums and a death benefit there when you pass rather than cash availability while you're living, GUL is the way to go!
Apply with a Different Company - Underwriting May be More Lenient (25% or more)
Here's a few examples of situations where companies rate you very, very differently.
- Family history of heart attack (some companies penalize for the instance, some companies penalize only for death in family member)
- Family history of cancer (same as above)
- Cholesterol or blood pressure medication (these will knock you out of the best class with some companies but not others)
- Weight (every company has different build charts meaning at your height/weight, you may be a better "fit" for one company over another)
- Travel outside the US
- Scuba diving, aviation, racing, skydiving
If you have a current policy and did not get the best rate class, there's a good chance a different company WILL give you their best rate class. Or if you got a Standard rating, there's a good chance another company will offer you "Standard Plus" which costs 25% less.
Now that you understand that the game is all about rate classes, speak to an independent agent about your health, family history, driving history, etc, and see if they can get you a better health class and save you money.
Save while You Shop for Life Insurance
If you're in the process of getting quotes, comparing quotes, ready to apply for coverage, these tips will save you big bucks!
Note: We have included a few more tips in our "technical tips" section below that are a bit more nerdy and, well, technical, but some also apply to current life insurance shoppers. Be sure to check that section out as well if you want to dive deeper.
Make Sure Your Agent is Experienced (10% to 70%)
All the benefits of working with an independent agent go out the window if you use a rookie agent who doesn't understand how underwriting differs from one company to the next.
When I first started out as an agent, I literally had NO clue that companies had different guidelines for things like blood pressure. I would literally just guess (As in, ok, he's probably gonna get the best rating), and quote people the best rates.
There was zero skill or money saving involved in that process. I'm ashamed of those days but I've learned a lot since then!
Nail the Medical Exam/ Get Healthy Before Applying (25%)
Eating a bunch of fatty foods and sugar or drinking excessively in the days leading up to your exam can mess with your exam results. Keep in mind the company will test your urine for drugs and nicotine as well as all your kidney and liver functions, take your weight, and do a lipid test.
Be sure to eat healthy, get plenty of rest, and get some exercise in the week or two leading up to your exam for best results.
Factor the Assets You Already Have into Your Needs (10%-20%)
When speaking to clients about how much coverage they need, most of them talk about their income and how many years they would like their spouse to earn that same amount of income.
What many people fail to do is consider their current assets. Say you have some cash and savings, some CD's and mutal funds, and some equity in your home. These are all assets you could potenitally draw on in the event of your spouse's passing. Be sure to factor those in and you may find that you need less coverage than you thought before, which will save you money!
Use a Life Insurance Calculator to Choose the Amount you Need (10%-20%)
Don't just guess at the amount of coverage to buy. A good life insurance calculator will take several factors into consideration such as:
- Inflation - Your death benefit will be worth less in the future
- Spouse's Income - You don't need to replace your spouse's income. Only yours.
- Percentage of Income to Replace - Do you really need to replace 100% of your income? After all, without you around, there will be one less mouth to feed, one less person driving and using gas, one less person buying clothes, and deodorant, and one less person who may one day need long term care services. You get the point. Maybe you only need to replace 60-70% of your income.
- Years your income will need to be replaced
- Investment Income - Keep in mind your death benefit can be invested and earn, say, 5% per year. A calculator will factor this in.
We like the calculator at Life Happens.
Visit the Doctor (25% to 50%)
Insurance companies frown on insuring people who have not visited the doctor in the past year. If you haven't gone in for a checkup in recent years (especially if you are over age 40), you should probably consider doing so prior to buying life insurance. You will want to ask for a regular physical and labwork.
Note: there's a chance something bad could trun up in your labs, so prior to doing this, you may want to buy some no-exam coverage.
Get Your Medical Records in Order (25% to 50%)
Many people don't realize that insurance companies often pull your records from your attending physician to help them underwrite your case.
And let me give you a hint. They trust your doctor more than they trust you!
If something is "off" in your records and does not reflect your current health situation, be sure to visit your doctor and clear it up and make sure they write it in the records (Seriously, ask them!)
For example, things you could make sure they reflect in their records are your current exercise and eating habits, your current weight, or if you have stopped smoking or lost weight, have them write down when this was so it matches up with your answers on your application.
Make them Prove It to You (25%+)
If you're working with an agent, ask them to share the company's underwriting guidelines and show you based on your weight, cholesterol, family history, or whatever your particular issue is, that you can be approved in the rating class they are quoting.
A good agent will have these handy and be able to share them.
Get a Screenshot of Quote Results (3-5%)
If you're getting a quote from an agent over the phone, ask them to send you a screenshot of the rates they are looking at. Often times, just to make a few extra bucks, an agent will quote you a rate from their list of companies and quote you one that is not the lowest rate on the list.
That's fine if they do that with a good reason. For example, this would be an acceptable reason:
"Mr. Jones, I did not quote you that rate from Ameritas because they are stricter on their blood pressure guideline. I quoted you this 3rd one on the list because that's the one that will approve you based on your blood pressure."
But if you ask them and they can't give you a good reason why they chose the more expensive one on the list, move on.
Include a Cover Letter on Your Application (Up to 25%)
I recently sold my home in San Diego and had two really strong offers.
Both of them submitted a nice letter explaining why they loved the house and a bit about their family. The only difference was one included a picture of their family, which included the cutest baby girl.
My wife and I accepted their offer even though it was just a bit lower than the other.
The point is we are all human and susceptible to let emotions play a role.
This can happen in life insurance underwriting as well.
When you submit your application, it really helps to add a letter. Sometimes your agent will do this for you, but a little known fact is you as the applicant can do it too!
You might follow an outline like:
Dear Underwriting Rep, here's my situation (wife, children, business, whatever), why I need the coverage, what happens if I can't get this coverage, etc.
Underwriters are typically going "by the book" and have to follow guidelines but sometimes there is some grey area in their decision making. Sometimes there's a judgment call to be made.
It's important if you are right on the line between two health classes, say preferred plus and preferred, that they choose the better rating. Ultimately, underwriters are human and a cover letter could just be the thing that pushes them over the edge to rate you better.
Buy Accidental Insurance Only (50% to 75%)
There are policies that ONLY pay out if you die in an accident. Obvioulsy they are less than ideal since they don't pay out for health related deaths but if you're on a budget, this may be the only thing you can get!
And since they only pay out for accidents, they're dirt cheap!
Take Out Less Coverage - With a Plan to Invest the Proceeds (10% to 20%)
Say you're considering a $750,000 policy for $100 per month. You figure your spouse could do "something" with that money, although the two of you haven't really spoken about it.
Here's an idea. Actually talk about the plan!
How, specifically, should he or she use the proceeds if you pass away?
With some planning, you might find that you could buy just a $650,000 or $700,000 policy and the resulting payout could be invested to spit out tens of thousands per year. So maybe you can buy less than what you had in mind with a bit of planning!
Strip the Policy of Unneeded Riders (5-20%)
If you're working with an agent, make sure they're not adding riders (additional benefits) on there that you didn't ask for.
Common riders are:
- Return of premium - costs 50% more often times
- Waiver of premium - waives premium if you become disabled
- Child rider - Usually not a great deal
Sign Up for Group Life Insurance Through Work (20-30%)
This one works great if you have health issues because work plans tend to ask just a couple of questions - like whether you're a smoker or not - and approve you. If you have health conditions and can get lumped into a bigger pool of insured people, it will probably be a big win for you savings wise. Definitely check out your work's group plan if they have one.
If you're in good health, however, the group plan will work against you. See tip #26.
Skip Group Coverage Through Work (20-50%)
Wait a second, Chris, in the last tip you told me to get coverage through work!
I know! Let me explain.
If you're in great health, you do not want to be lumped into a big group of people. Think from the company's point of view. They're insuring all sorts of people in bad health in a big pool. You'll pay a lot more that way.
If you're in good health, try getting your own policy instead. (Unless, of course, your company is paying the premiums!)
Big Ideas for magical savings
Much lesser known strategies that will save you some serious cash! As in, 90% to 100%!
Premium Financing: Borrow Your Premiums (90%)
Certain individuals may qualify for premium financing. In many cases, you can borrow up to 90% of the premiums with minimal cash outlay if you qualify.
The typical case involves:
- High net worth or high-income individuals
- Reason cash is not available to pay premiums
- Good health of the insured individual
- Some skin in the game - Some premium outlay (possibly 10%)
- High interest rates - It's not free; it's a loan. And it will need to be paid back at some point from the policy earnings or the death benefit. If the latter, it will cut substantially into your death benefit meant for your family
- Permanent life insurance policies
- Possibility of getting a large amount of coverage for minimal out-of-pocket outlay
They also create high commissions to your agent, and there is quite a bit of foul play in this industry, so be sure to read everything on the application. For example, make sure at application, the agent has disclosed to the insurance company that this is a premium financing case. Some companies don't want this sort of business. Tread lightly and work with an agent whom you trust completely.
Get Help Paying from the Family (10% to 100%)
Before you toss this idea aside, this can make a lot of sense for many families, especially if the people you are asking to help pay the premiums either:
1. Would need to support your family or be at a financial loss if you passed away
2. Or if they are beneficiaries of the death benefit.
Get Free Life Insurance from Mass Mutual (100%)
As a response to Covid-19, Mass Mutual is paying $3 billion in life insurance premiums for front-of-the line healthcare workers in what's known as their HealthBridge Program. They are 3-year term policies.
Bundle with Home and Auto (10%-100%)
Lots of companies who offer home and auto coverage also offer life. You should check with your agent to see if there is a bundle discount for buying life insurance. You might just get some low cost coverage.
I did this once with Farmers and the discount was so good that it paid for my entire life insurance policy, in essence, making it "free."
Overfund a Cash Value Life Insurance Policy (Up to 100% Future Savings)
If you want a plan that covers you for life, you may not want to be paying premiums into your 60's, 70's and 80's.
One thing you could do is pay more in the earlier years of the policy and let the cash value build up (it earns interest). The best policy for this is usually an equity indexed universal life policy since it allows for flexible premiums and credits your policy with the earnings of a major stock market index such as the S&P 500 but doesn't credit your policy with losses when the market goes down. What I like about this strategy is you're always moving forward, never back.
If your cash value grows big enough, you can stop paying premiums one day and let the cash value cover your cost of insurance.
Business life insurance savings
Employer Offers Executive Comp Life Insurance Plus Bonus (100%)
Many large companies offer executive bonus plans to entice high quality individuals to work for (or continue to work for) their companies. In this scenario, the company pays for the coverage. However, the typical tax result is that the employee or executive will be taxed on the amount that was paid in premiums for them. So be sure to ask if they will also bonus you to pay those taxes.
Split Dollar Life Insurance Plans (50%)
In another form of business life insurance, some companies will pay part of (say, half) of the employee's premium so long as a portion of the life insurance proceeds go to the company if the individual passes away. Typically, once you leave the employer, you have the chance to take over the premiums and set your spouse (or whoever you like) as the 100% beneficiary.
Technical Savings Tips
The real nerdy tips we love and have learned from years of being life insurance agents.
Take an Income Death Benefit Rather than Lump Sum (10-20%)
Let's say you're looking at a $500,000 policy.
You like the idea of your spouse being able to take $50,000 per year from it for 10 years.
If that's the case, you could actually request a $50,000 income per year death benefit from companies like Protective, rather than a big lump sum at death.
It will save you money because the company gets to hold onto their cash longer!
Buy more coverage - Save On Cost per Thousand (2-3%)
Insurance companies price their policies in "bands."
For example, a company might price all their policies from $100,000 to $249,000 at $1.50 per thousand. At that rate, a $245,000 policy would cost $367.50 per year (245 * $1.50).
But then the same company will charge less for higher bands. For example they might charge $1.40 per thousand at their band from $250,000 to $500,000. At that rate a $250,000 policy would cost $350 per year, which is LESS than the policy for $245,000.
The lesson is if you are looking for an odd ball amount like $240,000 or $95,000 or $960,000, be sure to round up to the next big even number (Think 100k, 250k, 500k, 1 million) to see if you get a savings at that higher coverage amount.
Note: this doesn't work unless there is better pricing at the higher amount. For example, a $390,000 policy would likely cost more than a $380,000 policy. It only works when you are near a "band" where there's a decrease in cost per thousand.
Pay with Credit Card - Get Points (1.5%)
Some companies - not many - allow you to pay your premium by credit card.
Why not get the points and save up for travel or cash back?
Backdate Your Policy to Save Age (5-8%)
Most life insurance companies go by your "nearest age" rather than your actual age. It makes sense if you think about it. If you're 39 years and 10 months old, you are closer to 40 and should pay 40-year-old rates rather than 39-year-old rates.
One of the cool features of life insurance pricing, though, is the ability to date your policy back (typically up to 6 months) to when you were a year younger.
So in our example, the 39 and 10 month old individual could backdate their policy 4 months to when they were 39 and 6 months old, and "save age" 39. You'd have to pay premiums from that date (so 4 extra months of premium) but usually if you're going to keep the policy 2 or 3 years at least, you'll break even by then and then the savings begin!
Backdate to Save Actual Age (5-8%)
In a similar strategy to "backdating to save age," some companies charge you based on your actual age rather than nearest age. So say you're 32 years and 2 months old. You could backdate your policy 3 months to when you were still 31 years old and pay 31-year-old rates!
Choose the Right Company Based on Your Age (5-8%)
The key to getting the two "save age" tips above to work for you is choosing the right company. If you're 40 years and 1 month old, you can't backdate a policy with a "nearest age" company because you'd have to backdate it by 7 months for the company to consider you 39 years old. Most only allow up to 6 months.
Or maybe if you are close to your next birthday, it will make more sense for you to simply apply with an actual age company since they are already dating you at your actual age, no backdating needed.
A good agent can help you with these technical issues.
Protective's Lower Term Hack (10-15%)
At the end of most level term plans, the death benefit stays the same, but the premium increases substantially on an annual basis.
Protective Life has a cool feature on one of their term plans called the Custom Choice UL - it's actually a universal life plan but for the initial fixed period, it looks and feels more like term - where the death benefit decreases (by about half) and the premium stays the same. The death benefit continues to decrease each year until it reaches $10,000 with no changes to your premium.
Let's say you've got coverage to pay down a long-term debt like a student loan. You run the projections and realize it's going to take about 20 years to pay off. What most people do is buy a 20 year term policy.
What you could do instead is buy a 10 or 15 year Custom Choice UL policy with Protective for the amount you need. After 10 to 15 years at the end of the initial, set term, your death benefit will be reduced by about half. BUT if you've been paying down your debt the whole time, the amount of coverage will probably still be close to the amount of debt you have left. Obviously you'd have to look closely at the Protective illustration along with your loan schedule to see if the numbers line up. But if they work, you can get away with buying a shorter term which saves a lot of money.
Life Insurance Savings for Seniors
Strategies to help individuals over age 60 to save big on life insurance.
Seniors - Re-Check Rates at Ages 60, 61, 65, and 70 (25%)
If you already have a policy and you're a senior, be sure to check with a life insurance agent once in a while to see if you "now" qualify for discounts or more favorable underwriting that will put you in a better health class.
Some companies are much more lenient on things like height/weight and medications once you hit age 60, 61, 65, or 70. If you bought a policy and didn't get the top tier health rating, you could potentially save a ton of money by getting approved at a better health class.
Don't Buy Final Expense Life Insurance (50%)
There is a brand of life insurance for seniors known as final expense insurance which offers quick and painless coverage with no medical exam. It's also characterized by two or three qualification tiers known as:
- Immediate or level death benefit - the full death benefit is available immediately after policy issue
- Graded death benefit - for people who have more serious medical issues, the insurance company makes the death benefit available over time such as 30% available in year 1 and 70% available in year 2.
- ROP - for even more serious health issues, the company will not approve you for the top two tiers. Instead, you'll only receive your premiums back (Return of premium), typically with an additional 10% to 12% tacked on for good measure if you pass away during the first two to three years after policy issue
Here's the thing about final expense policies. They are really only for people with very serious medical issues or if you're a senior and want quick coverage, and don't mind overpaying for it. The benefit is not taking a medical exam, but you could typically get double the coverage or more by speaking to an independent agent about term life insurance or guaranteed universal life insurance.
Buy a Second-to-Die Policy (10-20%)
If you're shopping for a whole life or guaranteed universal life insurance for estate planning reasons, you could save a lot by buying a policy that only pays out upon the second spouse's passing.
Say, for example, you're worth $20 million and have a big estate tax problem. Estate taxes will not be due upon the first spouse's passing, but the second. Here's where a second-to-die policy could make sense.
The best part is if one of the spouses is in less-than-stellar health or even uninsurable, they can usually get coverage if the other spouse is in good health.
Factor in Your Spouse's Life Expectancy and Ability to Work (10-20%)
Many people have spouses who stay home and don't work. When they go to buy life insurance, they assume their spouse would need 100% of their income because their spouse isn't working. But could they? If they had to, could they? How much could they earn? If you don't mind the thought of your spouse working, you might add their potential earnings back into the equation when calculating how much they need.
And not to be too morbid, but how is your spouse's health? How old are they? This could help you determine approximately how long they'll live and how many years they'll need to live off of your life insurance proceeds.
- Instead of doing this yourself, have Chris Lalor a 20-year agent can do all of this for you
- Ask for discounts - Is there a discount if your spouse also signs up? Buy 250K instead of 200K.
- Healthy Lifestyle credits - Omaha plan
- Buy an automatically renewable policy - If you develop a health issue later
- Get free stuff - Aviva? Who was it that gives an iFit watch?
- Go to doctor regularly for discounts
- Don't buy from a commissioned salesperson - Just an idea. I think Anthony does this. Theoretically they'll make best suggestion instead of trying to hike up your premium
- Explain to your agent your goal to pay as little as possible - Many agents who love life insurance will try to load you up with a longer term and more coverage than you need and wrap additional policy features (waiver of premium) and other. They might mean well but if you're on a budget that's no good. Don't assume they are trying to give you the lowest cost plan. Most agents work on commission. Tell them your goal!
- Don't buy it on your kids
- Plan prudently - drop your life insurance once you no longer need it
- Re-evaluate your needs - As you get older, say your kids get jobs and are self sufficient or your spouse gets a job, or you come into some money. You can then drop or reduce your life insurance
- Bundle with Long-Term Care - LTC is one of the most expensive insurance types. But did you know some Life insurance plans offer this?
- Term rider - if you do buy WL, make sure you
- Split dollar - If you're buying it for work, have your employee pay some of the premium
- Avoid return of premium rider
- Don't buy less than 100K
- Do some estate planning - For wealthier individuals, explain tax consequences, but there are trusts and things to
- Keep life insurance out of your taxable estate with an irrevocable trust - You can buy less life insurance if the proceeds are tax free
- Use a reputable, highly rated company who can pay your claim if you die - Explain how this
- Make it part of your comprehensive financial plan - The best life insurance plans involve a comprehensive plan around your financial, tax, and legal planning.
- Not sure about your health? Buy no exam
- Buy from a company who is more lenient on health issues, medications, weight, etc. (This should go before "buy from an independent agent" so the next line is "Or let an agent do the work for you which leads into next point)
- Convert Term to Permanent - Best for people whose health has deteriorated over the course of the term
- Partial conversion (Convert for less)
- Is Term Policy Near Expiring? Convert before it goes up.
- Casual smokers companies - A couple companies (Minn Life) have rates for people who admit to smoking a cigarette less than X per year. Whereas everyone rates them as a smoker. In th
- Marijuana - Social vs Prescription
- Buy young - Explain the benefit of buying when you're young and healthy. (Buy Now should be the next point. Premiums are on the rise.)
- Take advantage of Covid changes -
- Buy an Exact year term length - Like 12 years thru AIG
- Get a raise - Mutual of Omaha Fit credits
- Go to college - Mutual of Omaha Fit Credits
- Maintain your credit - It costs the insurance company a lot of money to issue you a policy. During the first year, they have to pay the agent their commission, pay for a medical exam, plus costs to underwrite the policy. Most companies don't break even on the policy fof a few years at least. So they need to be sure if you buy a policy, you can afford it. Bankruptcy in past could affect approval as well as carrying a large credit card balance, late or missing payments.
- Don't lie on your application - Insurance companies cross-check your answers on your application with your medical records, the MIB, Motor Vehicle Report, Prescription check, and if you take a health exam, your exam. Story of Banner rejecting Lisa straight out b/c she applied and said she was a non-smoker and they found nicotine in her urine.
- Don't let your policy lapse - Secondary addressee - Nothing is worse than changing your bank or address and letting your policy lapse
- Sell your policy - Can't afford the premiums? There may be a market for it.
- Wearable Technology - At John Hancock, Policyholders score premium discounts for hitting exercise targets tracked on wearable devices such as a Fitbit or Apple Watch