May 26, 2019

Cheap Life Insurance

Read more about Life Insurance

Life insurance doesn't cost as much as you think—plus, there are things you can do to find the most affordable policy. Learn how to get the best deals on life insurance.

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A number of factors go into the cost of your life insurance policy, including

  • Type of policy
  • Death benefit amount
  • Insurance company
  • Your age, health, and risk assessment by the insurer

While you can't do much to change your age or health assessment, you can choose a cheaper policy that fits your financial needs.

Certain policies are traditionally less expensive. Keep reading to find an affordable policy that's right for you.

Consumers overestimate the cost of life insurance by nearly three times the actual amount, according to a recent life insurance barometer study conducted by Life Happens and LIMRA.

Most Affordable Types of Life Insurance

Term Life Insurance
Term life insurance is temporary insurance that covers a particular number of years, or "term." Typical terms are 10, 15, 20, 25, and 30 years, although there are 5-year and even year-to-year policies.

If you die within the term, your beneficiaries will receive the death benefit payout. In most cases, if you live until the end of your coverage, your policy lapses and you no longer have coverage.

Because most people live through their term, the insurer doesn't have to pay the death benefit, which makes term life one of your cheapest options.

While the actual premium also depends on the term length and death benefit coverage amount (usually ranging from $100,000 - $1 million), purchasing a policy when you are younger and in good health will give you the best premium.

For a 20-year, $500,000 policy, a 30-year-old male will pay around $21.88 per month, or around $250 per year.

Keep in mind that the lower the term years, the lower the premium. Ten-year terms are going to cost less than 20- or 30-year terms. If you're shopping strictly on price, a shorter-term period is more fitting.

To learn more about term life insurance, visit our article here.

Final Expense Insurance
This permanent policy is one of your cheaper options. You will have coverage as long as you continue paying monthly premiums until you die.

Because it has a small face value (around $5,000 - $25,000), these policies are often only purchased to cover funeral and other end-of-life expenses. But the proceeds can be used for any purpose your beneficiaries see fit.

The average funeral costs between $7,000 and $10,000, according to the National Funeral Directors Association. This doesn't include flowers, an obituary, cemetery plot, or headstone. Sometimes it doesn't even include certain viewing services.

Underwriting is quick, and there is no medical exam required. Premiums are fixed, meaning the amount you pay doesn't increase as you get older or your health deteriorates.

For a 50-year-old male, a $15,000 death benefit would cost around $64 per month, or $768 per year.

To learn more about final expense life insurance, visit our article here.

Term life and final expense insurance are cheaper options. But other, more expensive coverage types offer better benefits. Read on to learn about your options.

Least Affordable Types of Life Insurance

Permanent Life Insurance
This type of insurance includes options like whole, universal, and variable life. With a permanent policy, you could pay 10 times or more the price of a term insurance policy. Why?

This life-long coverage has a cash value component. Some permanent policies even include investment options. The cash value comes from a portion of your premium payments.

Depending on what type of coverage you have, it can also grow based on:

  • A guaranteed rate set by the insurer (whole life).

  • The financial performance of the insurer's portfolio (universal life).

  • A rate determined by portfolio subaccount investments that you choose, like NASDAQ (variable life).

For most families, a term policy would suffice. Permanent policies are good for people who:

  • Want to leave an inheritance to their beneficiaries, but plan on spending their retirement savings.

  • Have a child with a disability who will require lifelong coverage.

  • Want to grow a cash value account that they can borrow against in the form of a loan. This can be especially beneficial for business owners.

Permanent policies cost more because of the cash value and/or investment component and the life-long coverage. But term policies will provide the same death benefit coverage for a much lower premium.

Here's a comparison of monthly premiums for a 20-year term policy (which is one of the more popular terms) compared to a whole life policy (which is the most common form of permanent insurance). The death benefit coverage amount is $500,000.

AgeGender20-Year TermWhole
30Male$20.88/mo.$299.50/mo.
Female$19.14/mo.$293.23/mo.

In one year, the 30-year-old male would spend $250.56 on a term policy compared to $3,594 with a whole policy. That's savings of $3,343.44 in one year. Multiply that by the 20-year term length, and the man would save more than $66,800.

If you think you need a permanent policy, the best way to save money on it is to purchase the policy when you are young and healthy. This will get you the best possible rate.

To read more about permanent life insurance, check out our article here.

No-Medical Exam Policies
When you apply for life insurance, most insurance companies require a medical exam and some tests to complete your application. This includes meeting with a medical professional who will:

If the results of any of these tests indicate a health condition or chronic illness, you could be denied a policy or be charged a higher premium, depending on the severity of the condition.

If a medical exam would make your coverage more expensive or even prevent you from getting approved, a no-exam policy would be a good option.

Bypassing the exam also makes underwriting decisions quicker.

No-medical exam policies may be easier. But these policies typically cost more and provide less coverage than a medically underwritten policy. That's because there is less knowledge on the risk the insurance company is taking by insuring you.

Let's compare costs.

Below are monthly premiums for a 30-year-old male and female for a 10-year term policy, and 10-year no-exam term policy. Both coverage amounts are $250,000.

AgeGender10-Year Term10-Year No Exam
30Male$12.50/mo.$19.81/mo.
Female$10.34/mo.$11.40/mo.

A 30-year-old male will pay $7.31 less per month, or $87.72 less per year, with a regular 10-year term. Over the 10 years, this is a savings of $877.20.

While the differences aren't as significant as with permanent policies, you will benefit from a cheaper premium if you are young. The younger you are, the less likely you are to have any medical conditions affecting your health. The older you are, the higher your premium will be.

To read more about no-exam life insurance, click here.

Tips for Getting Cheap Life Insurance

The top two ways to find affordable life insurance are:

  • Purchase a term policy if it makes sense for your financial situation.

  • Quote from multiple insurance companies to find the cheapest rates.

Here are more tips to help you find and get the cheapest life insurance coverage.

  1. Purchase only the amount of coverage you need.
    The purpose of life insurance is to take care of your family after you're gone. Consider the amount of outstanding debt you have, if you have children or a spouse to provide for, and if you want to leave assistance for a funeral and other end-of-life expenses (more on that below).

    Remember: The higher your coverage amount, the higher your premium.

  2. Don't add riders.
    Policy riders will increase your premiums. Examples of riders include a child rider, accelerated death benefit, guaranteed insurability, and waiver of premium.

    Most riders cannot be added on at a later date. If you do need a rider, like additional coverage for your children or a term conversion rider, make sure you add it when you first purchase the policy.

  3. Work with independent life insurance agents.
    Independent agents have the ability to quote and write with multiple insurance companies.

    Captive agents work for one company and can't quote or write with other companies. That means they don't have the ability to find an insurer or policy that's cheapest. Also, captive agents often charge additional fees.

  4. Purchase when you're young and healthy.
    As you get older or your health deteriorates, your risk score will increase and your premiums will also increase. If you're in your 20s or 30s and considering marriage or starting a family, you should purchase a policy now.

    Plus, you never know when you could be diagnosed with a medical condition that could affect your ability to purchase cheap life insurance, like diabetes, cancer, or high blood pressure. Make sure to buy a policy before that happens.

  5. Consider the financial stability of the insurer.
    Sometimes the cheapest option will be a smaller, newer, or lesser-known company.
    Before buying, check the financial stability of the insurer. Evaluate the likelihood of them paying out the death benefit should you die.

    Some insurance companies that are not financially stable may not pay out claims, even after years of you paying monthly premiums.

    A.M. Best is a rating agency that provides up-to-date information about an insurer's financial health. Check this, and other financial ratings, before purchasing. It also may help to read reviews about the insurer to learn if they have timely and consistent claim payouts.

  6. Don't purchase a no-medical exam policy (unless you absolutely need it).
    If you opt for a non-exam policy, the insurer is taking on additional risk by insuring you because they know less about your health.

    This means you'll pay a higher premium. You also won't get as high of a coverage amount as you would with a medical exam.

    There are a few reasons you would want to purchase a policy without an exam. These include:

    • Needing insurance fast.
      Non-medical exam policies have quick underwriting, often within 24-48 hours. Medical exam policies could take 4-6 weeks or longer to underwrite. You may need quick coverage for a divorce decree or to secure a business loan.

    • You have (or may have) a medical condition.
      If applying for a policy that includes a medical exam, you would be denied coverage or have to pay a higher premium due to a health condition you were unaware of. This becomes more likely the older you are. No-exam policies are easier to qualify for even if you already have a condition like high blood pressure or diabetes.

    • You have a dangerous job or hobby.
      An insurer will often deny you coverage because they don't want to take on the risk of covering you if you'll likely die before paying off the full policy. However, without the medical exam and with more lenient questions, this won't be an issue with no-exam policies.

  7. Quit smoking.
    Smokers will pay a higher monthly premium than non-smokers because of the increased risk smoking causes to your health.

  8. Manage any chronic condition you have.
    If you are living with a medical condition, like diabetes, you can still qualify for life insurance. It can even be affordable—if you manage your condition properly. By eating healthily, exercising, taking medications as prescribed, and visiting the doctor regularly, you are working to lower your risk factors.

  9. Bundle your auto, home, and life insurance.
    Many insurers offer discounts if you bundle your auto, home, and life insurance together through the same insurer. Large insurers, like State Farm, Allstate, and Progressive, can give you the cheapest quotes because you have the most options to bundle.

    Review all of your insurance products and policies with your life insurance agent. Work with him or her to choose a company that can give you the coverage you need at the price you're looking for.

  10. Live, drive, and travel safely.
    When you apply for a life insurance policy, the insurer checks your driving record, occupation, and hobbies.

    If you have several tickets for speeding or have been involved in accidents, you are probably considered a reckless driver and, therefore, riskier.

    If you travel to dangerous places, have a dangerous hobby like scuba diving or hunting, or a dangerous occupation like firefighter, police officer, or construction worker, your risk—and premiums—are higher.

    To avoid unnecessarily higher premiums, keep your driving and accident record clean and avoid the risky activities.

Cheaper life insurance is one of many reasons to focus on your health and wellbeing. Lera Blog explains simple lifestyle changes you can make to decrease your chances of developing specific cancers.

What Goes Into the Cost of Life Insurance?

A number of factors determine your monthly premium. In most cases, when you apply for a life insurance policy, you must go through an underwriting process that includes a medical exam to help insurers determine your risk.

Your risk is what determines the likelihood of the insurer having to pay out the death benefit to your beneficiaries. Some of the factors that determine your risk include your:

  • Age
  • Gender
  • Health and medical history
  • Family health and medical history
  • Occupation and hobbies
  • Driving history
  • Credit history
  • Prescription drug history
  • History of tobacco use

Generally the older and/or unhealthier you are, the higher your monthly premium will be. If you are a smoker, have a dangerous occupation or hobbies, or have a poor driving or family medical history, you will likely pay more as well. This is because you are more likely to pass away before the policy is paid off.

Even if you have a chronic illness, like diabetes, you can still get coverage as long as your illness is under control and you take steps to keep it that way.

When you apply for life insurance, it's important to be truthful on your application. Term policies have a two-year hold period, which means if you die within the first two years of coverage, the death benefit will not pay out to your beneficiaries.

With all policies, once you pass away, a miniature "investigation" is conducted to ensure you didn't die from a condition that should have been reported on your application. If you aren't honest on your application, it's technically considered fraud, and there is an increased likelihood your death benefit will not pay out.

How Do I Calculate How Much Life Insurance I Need?

Once you decide you need life insurance, the next step is determining how much coverage you need. There are simple ways of calculating your coverage on your own. But it might be beneficial to talk to a life insurance agent or financial planner to help you decide.

The easiest way to calculate your coverage is to use a life insurance calculator. You can find these with a quick internet search. The calculator will ask questions about your age, insurance type, expenses and debt, standard of living, and savings. It will then process your estimated insurance needs and approximate monthly cost.

Some things to think about when purchasing your policy are:

  • How many do you want to replace?

  • What financial obligations do you want your policy to cover? This can include:

    • Funeral cost
    • Mortgages
    • Student loans
    • Credit card debt
    • Medical bills
    • Child care

  • What services do you provide that would have a cost to replace? This is especially important if you are a stay-at-home parent and your partner wouldn't be able to quit their job to provide those services.

  • Do you have any savings or life insurance through a current employer? You should subtract those totals from your coverage amount.

A general recommendation is to have 10 times your annual salary. So, if you make $60,000 per year, you should consider a $600,000 policy.

How Do I Apply for Life Insurance?

Start by calculating how much coverage you need by following the steps listed above. Be prepared by knowing some general medical information such as your height, weight, blood pressure, and cholesterol levels.

Most companies offer you the ability to either request a quote or get a quote online.

  • Request a Quote
    You'll enter and submit basic contact information that is provided to a life insurance agent. You can complete the form online. The agent will follow up with you via phone or email (depending on your preference).

    They will ask questions like why you need life insurance, what kind of coverage you are looking for and for how long, and other informational policy questions. Once they get all of the information, they will get quotes for you from different companies.

  • Get an Online Quote
    Answer questions like your gender, date of birth, height, weight, coverage amount you are considering, and other basic, simple health questions.

    You will have to do this for every company you are considering. Once you submit the information, you will either be emailed by a company agent or immediately shown a quote.

  • Talk to an Agent
    Another option is to go solely through an insurance agent. You'll provide them with all of your contact and health information, and they request the quotes for you. With this option, you don't have to do anything yourself, aside from answering their questions.

Once you decide which quote and company is right for you, you'll submit an application for the policy. You'll be asked to answer additional questions like your age, marital status, occupation, and basic health history.

There are basically three ways you can then purchase life insurance:

  1. Directly from an insurance company
    While this route typically ensures buying from a large, reputable insurer, it also may not get you the best price.

  2. Through an insurance agent
    Independent agents generally represent multiple companies, so they are able to compare more prices and often get you a better price.

  3. Through an independent online broker
    Purchasing online may seem faster and easier, but keep in mind life insurance policies and costs can be confusing—so it may be more difficult to do it on your own.

While you should consider life insurance while you're young and healthy, purchasing without a need to have a policy can cost you more money in the end. You probably don't need to purchase life insurance until you have a large life event, like buying a house, getting married, or having children

Bottom Line

Life insurance can provide a critical financial safety net for your family after you're gone. You can find an affordable policy with coverage you need.

If you're strictly looking for a cheap price, choose a term policy. You can decrease costs by:

  • Purchasing only the coverage amount you need.

  • Getting multiple quotes from different insurers.

  • Working with a life insurance agent.

  • Get a policy when you are young and healthy to avoid higher monthly premiums.

While some factors that go into the cost of your life insurance are unavoidable, like your age, other factors are within your control. You'll usually pay less the earlier you apply for coverage.

Disclaimer: Opinions expressed here are author's alone. Please support CreditDonkey on our mission to help you make savvy decisions. Our free online service is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content.

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