If you're putting off buying life insurance because you think
it'll cost too much, it's time for a reality check.
"Most Americans overestimate the cost of life insurance by
almost three times," says Catherine Theroux, a spokesperson for
LIMRA, a global research and consulting organization that tracks
the life insurance industry.
Young adults, who are most likely to qualify for the best
insurance rates, overestimate the cost by almost seven times,
according to recent research by LIMRA and the nonprofit LIFE
Basic life insurance is surprisingly affordable, even if you're
supporting a family on a shoestring budget. Insure.com's
life insurance basics
provides an overview of life insurance alternatives.
Here are six tips for finding the most affordable coverage
1. Buy as much term life as you can afford now
The average cost of basic term life has dropped by about 50
percent in the last decade, says Marvin Feldman, LIFE Foundation
president and CEO. The decrease is due to longer life expectancy
and greater cost efficiency in product design and administration,
The typical cost of a 20-year, $250,000 level-term life policy
for a healthy 30-year-old is $150 a year, about the cost of one
Starbucks latte per week. Consumers surveyed for the study by the
foundation and LIMRA inaccurately estimated the cost of a typical
term life policy at $400 a year.
Term life insurance
covers you for a certain period -- such as 10, 20 or 30 years --
and pays a death benefit if you die while the policy is in force.
The younger and healthier you are when you buy, the lower your
quotes will be. Life insurance rates go up as you age and as you
develop health conditions, such as high blood pressure.
2. Consider annual renewable term life
Annual renewable term life guarantees your insurability for a
set period of time. However the premium increases each year during
the term, based on your age. With level-premium term life, the
premium stays the same for the entire term.
In the early years of the policy, premiums for annual renewable
term life are less expensive than those for a comparable level-term
life policy. David Schulman, a MassMutual general agent at DBS
Financial Group in Fort Lauderdale, Fla., recommends annual
renewable term for people on tight budgets whose incomes will
increase over the years.
3. Comparison shop
Life insurance rates vary by company. Get term life quotes from
different carriers to find the best deal. Generally, the more you
buy the less the cost is per $1,000 of coverage.
4. Don't go by price alone
Check the financial ratings for the life insurance company
selling the product before you buy, and shop for quality, Schulman
Insurance Company Ratings Lookup Tool
provides free Standard & Poor's financial strength ratings.
Schulman recommends steering clear of ultra-cheap term life
products that lack important options, such as waiver of premium
riders, which pay the premium if you become disabled and can't
Another important feature that might not be available on the
cheapest products is the ability to
convert the term policy to permanent life
, such as whole life or universal life.
Permanent life insurance, which normally is more expensive than
term life, covers you for your entire life and includes cash value,
which grows tax-deferred. The ability to convert is important for
two reasons. One, the conversion feature lets you turn the term
life policy into permanent coverage, even if you develop a health
condition and would otherwise be uninsurable. Two, conversion lets
you build a permanent investment as your income grows.
Shulman says you should work with an agent to help sort through
the options. Although term life is simpler than whole life or
universal life insurance, the products vary and there are nuances
to consider when choosing a policy.
5. Low income? Apply for free life insurance
MassMutual's LifeBridge Program provides free, 10-year, $50,000
term life coverage for parents who qualify. The company pays the
premium and issues the policy to a trust. If you die within the
term, the trust will pay up to $50,000 to cover your children's
education. Your kids have 10 years after your death or until age 35
to use the money.
To be eligible, you must be between ages 19 and 42 and a parent
or legal guardian of a dependent child under 18. You must be
employed with a family income between $10,000 and $40,000, and you
must be in good health.
Since the program was launched 10 years ago, it has issued
12,300 policies and paid 22 claims, MassMutual spokesperson Laura
6. Maximize group life insurance
Many employers offer basic group life insurance as a benefit.
Usually, the amount of coverage isn't enough for most families.
Check on how much is provided and whether you can supplement it
with additional group life coverage at your own expense. Premiums
for voluntary coverage through a group plan can be 10 percent to 20
percent less than individual life insurance because of enrollment
and billing efficiencies, according to the LIFE Foundation.
Think about your family
If you're tempted to delay purchasing life insurance because
money is tight, just think how financially stressed your family
would be without you and your income.
Research by the LIFE Foundation shows a big reason people don't
buy life insurance is they have other financial priorities, such as
paying the mortgage or saving for their children's education.
"But those priorities are exactly the reason to buy it," Feldman