When you’re in the market to purchase term life insurance, there are some rules you must follow to ensure you don’t needlessly overpay for your policy. By just following these four simple tips you could end up saving a lot of money each month which could equate to thousands of dollars or more over the life of your policy.
1. Shop Around-Receive More Than One Quote
This is the first tip because it’s the most important. Many life insurance shoppers make the mistake of purchasing their policy from the first agent they receive a quote from. Whether it’s inexperience, complacently or the salesman worked his or her magic, it is vitally important to receive more than one quote before you pull the trigger and buy.
Take a look at the differences in prices for the same coverage for a 45 year old male purchasing a $250,000 20 year term policy in these common scenarios.
Scenario 1. The client smokes cigars more than once a week, uses chewing tobacco or smokes a pipe. Prudential will cost $54.45 month at the non-smoker plus rating class. MetLife will charge $113.54 for the same applicant. Just by shopping around this insured will see a savings of over $59 month, over $700 a year or $14.181 over 20 years!
Scenario 2. An applicant is currently taking blood pressure medication and his bp had been under control for past 5 years. Banner Life would give this insured the preferred plus rating class at $29.97 month vs. Transamerica which will be at the preferred rating class at $38.94 month. Comparing rates from different companies gives him a savings of almost $9 month, over $100 a year or over $2,152 over the course of the policy.
Scenario 3. Same applicant’s father passed away in his late 40’s from cancer. Protective Life will cost him $29.83 month giving him the best rating class-select preferred- while American General (AIG) will issue this same applicant at the standard plus rating class for $47.82 month. By comparing rates this applicant is saving almost $18 month, over $200 a year or over $4,300 over a 20 year term.
Bottom Line: Receive quotes from more than one company; it can literally save you thousands of dollars which can be better spent paying other bills or invested in a retirement account.
2. Ask Your Agent about Build Classes
This tip can save you a lot of money and it’s a secret that most agents really don’t want their clients knowing about because it may involve you delaying the purchase of your life insurance for a month or so. Beside your health, your build (height and weight) will be the single largest determinant of how much you will end up paying for your life insurance policy. The truth is if you are just are few pounds over the requirements of a particular weight class, the rate is going to increase. For example, if we use the same $250,000 20 year term life policy used in the first tip. If the male applicant is 6’00 210 lbs he would receive the preferred rating class with American General whereas if he were 205 lbs he would receive the best rate class preferred plus- saving him over $1,400 over the course of the policy.
AIG (America General) weight guidelines for a 6’00 male for our 45 year old applicant-$250,000 20 year term:
Preferred Plus Preferred
$31 month– 205 lbs or under $37 month– 205 lbs to 221 lbs
Standard Plus Standard
$48 month– 221 lbs to 240 lbs $56 month– over 240 lbs
A word of caution: if you don’t have life insurance you’re gambling with your family’s future by delaying. Let’s be honest, everyone wants to lose a few extra pounds but life gets in the way. I recommend to most people who don’t have any life insurance or not enough life insurance is to purchase the coverage now and when you do lose the weight reapply for the better health class at that time. Keep in mind that some companies will also add some of the weight back for their calculations if you lose a lot in a short period of time. The application process is free; the only investment for you is the thirty minutes it takes for the health exam. Secure the coverage now and reapply when you lose the weight; it’s a win-win for you and your family.
3. Prepare for the Health (Paramed) Exam
The life insurance medical exam (also known as a paramed exam) is an essential part of the life insurance application process. This is the insurer’s only opportunity to evaluate your health before they are on the hook for hundreds of thousands or even millions of dollars. If you follow some of these helpful tips you can get the best results which will lead to you receiving a better rate.
-Try to do your exam in the morning.
-Fast for 8-12 hours before the exam.
-A week before your exam stick to a healthy diet. Try to avoid or reduce your intake of fatty and salty foods.
-Do not drink alcohol in the days leading up to your exam.
-Avoid strenuous exercise 24 hours before your exam.
-The morning of your exam don’t eat any breakfast, have any coffee, or use any form of nicotine.
4. Pay Annually
Life insurance companies give you a discount if you pay your premium in full each year instead of paying by the month or quarter. For example: using the same $250,000 20 year term policy for a healthly 45 year old male the monthly premium would be $31 a month which will cost $372 over the year. The annual upfront cost is just $344.
AIG (America General)
Preferred Plus Monthly: Preferred Plus Annual Savings
$31=$372 $344 $560 over life of the policy
In this tough economy not everyone will have the luxury of paying their policy in full each year. The good news is at any time during your policy you can change your billing. So even if you can’t afford to pay annually right now, at any time in the future you can make the change and save from that point forward.
If you implement these four easy to follow tips in your next term life insurance purchase you can potentially save yourself thousands of dollars or more. Don’t allow inexperience or complacency to prevent you from saving the money you work so hard for.
*Rates as of 8/29/2013. The information in this post is for informational purposes only and is not a guarantee of rates and insurability. Rates and eligibly are subject to the underwriting guidelines of the insurance companies and state in which you live.