Money-Saving Tips for Life Insurance Premiums: How to Protect Your Loved Ones Without Breaking the Bank
Talk to one of our experienced advisors, today!
16 Minute read
Originally published: April 5, 2023
Money-Saving Tips for Life Insurance Premiums: How to Protect Your Loved Ones Without Breaking the Bank
Talk to one of our experienced advisors today!
16 Minute read
Originally published: April 5, 2023
Life insurance is an important investment that can provide financial security and peace of mind for you and your loved ones. However, the cost of life insurance premiums can vary greatly depending on a variety of factors, including age, health, and lifestyle habits. While it’s important to choose the right amount of coverage for your needs, it’s also important to find ways to save money on your life insurance premiums. In this blog, we’ll explore some tips for saving money on life insurance premiums without sacrificing the coverage you need.
Case Study: How Choosing the Right Type of Life Insurance Can Save You Money
Amit is a 40-year-old small business owner who is married with two children. He wants to ensure that his family is financially protected in the event of his untimely death, but he is concerned about the cost of life insurance premiums.
After doing some research and speaking with an insurance agent, Amit decides to purchase a whole life insurance policy with a coverage amount of $1 million. While the premiums are higher than what he would pay for a term life insurance policy, Amit likes the fact that his coverage will last for his entire life and that the policy includes a savings component that can grow over time.
Amit works with his financial advisor to ensure that he can afford the higher premiums, and he is able to make the necessary adjustments to his budget. Over time, the savings component of his policy grows, providing him with an additional source of retirement income and a financial cushion for unexpected expenses.
In the end, Amit is glad that he chose a whole life insurance policy, as it provides him with the lifelong coverage and savings component that he was looking for. While he pays higher premiums than he would with a term policy, he feels that the additional benefits are worth the cost. By carefully considering his options and working with a financial advisor, Amit is able to make the best choice for his needs and ensure that his family is financially protected.
In this article:
- Overview of Life Insurance
- Why is Life Insurance Essential
- General Tips for Saving Money on Life Insurance Premiums
- Ways to Save on Life Insurance Before You Buy
- Ways to Save During the Life Insurance Application
- How Can I Improve My Health to Lower My Life Insurance Premiums?
- Affordable Life Insurance Options: Which Type is Right for You?
- Frequently Asked Questions (FAQs) About Saving Money on Life Insurance Premiums
Overview of Life Insurance
Life insurance is a contract between an individual and an insurance company that provides financial protection for the individual’s loved ones in the event of their untimely death. The individual pays a monthly or annual premium to the insurance company, and in exchange, the company pays out a lump sum of money, known as a death benefit, to the individual’s beneficiaries upon their death.
There are several types of life insurance, including term life insurance, whole life insurance, and universal life insurance. Term life insurance provides coverage for a set period of time, such as 10 or 20 years, and is typically the most affordable type of life insurance. Whole life insurance provides coverage for the individual’s entire lifetime and includes an investment component that allows the policyholder to build cash value over time. Universal life insurance is similar to whole life insurance but offers more flexibility in terms of premiums and death benefits.
Life insurance is important for individuals who have dependents who rely on their income, such as spouses, children, or other family members. It can provide financial protection for the individual’s loved ones in the event of their death, helping to cover expenses such as mortgage payments, childcare costs, and other living expenses.
When choosing a life insurance policy, it’s important to consider factors such as the amount of coverage needed, the type of coverage, and the premiums. It’s also important to choose a reputable insurance provider and to regularly review and update the policy as needed. Overall, life insurance can provide important financial protection for individuals and their loved ones, giving them peace of mind and security for the future.
Why is Life Insurance Essential
Life insurance is essential for several reasons. Firstly, it provides financial protection for your loved ones in the event of your untimely death. If you have dependents who rely on your income, such as a spouse, children, or other family members, life insurance can help cover their living expenses and ensure that they are able to maintain their standard of living even after you are gone.
Secondly, life insurance can provide peace of mind and security for you and your loved ones. Knowing that you have a safety net in place can help reduce stress and anxiety, and allow you to focus on other important aspects of your life, such as your health and your family.
Thirdly, life insurance can be an important component of estate planning, helping to ensure that your assets are distributed according to your wishes and that your loved ones are taken care of after you are gone. It can also help cover estate taxes and other expenses that may arise after your passing.
Overall, life insurance is essential because it provides financial protection, peace of mind, and security for you and your loved ones. It’s important to choose the right type and amount of coverage for your needs and to regularly review and update your policy as needed to ensure that your loved ones are always protected.
For more information on how to get the best life insurance policy and rates in Canada check out our blog where we mention reasons why you need life insurance and factors to get the best term life insurance policies!
General Tips for Saving Money on Life Insurance Premiums
- Improve Your Health: One of the most effective ways to save money on life insurance premiums is to improve your health. Insurance providers typically offer lower premiums to individuals who are in good health, have a healthy BMI, and do not smoke. By adopting healthy habits such as exercising regularly, eating a balanced diet, and quitting smoking, you can improve your health and potentially lower your life insurance premiums.
- Shop Around: Don’t settle for the first life insurance policy you come across. Instead, shop around and compare policies from different providers. Different insurance providers may offer different rates and coverage options, so it’s important to do your research and find the policy that’s best for your needs and budget.
- Choose Term Life Insurance: Term life insurance is typically more affordable than whole life insurance, as it provides coverage for a set period of time, such as 10 or 20 years. If you only need coverage for a specific period of time, such as until your mortgage is paid off or your children are grown, then term life insurance may be a more cost-effective option.
- Bundle Your Insurance: Many insurance providers offer discounts to customers who bundle their insurance policies, such as life insurance and auto insurance. By bundling your insurance policies, you can save money on your premiums and simplify your insurance coverage.
- Pay Annually: While it may be tempting to pay your life insurance premiums monthly, paying annually can save you money in the long run. Many insurance providers offer discounts to customers who pay their premiums annually, so if you’re able to pay upfront, it may be a good option to save money on your premiums.
Ways to Save on Life Insurance Before You Buy
- Choose the appropriate insurance type: Consult with a life insurance advisor to determine whether term, permanent, whole life, or universal life insurance best suits your needs. Purchasing the wrong type could lead to wasted time and money when you have to replace it later.
- Avoid delaying: As you age, insurance rates increase, and your health may decline, making it difficult to qualify for standard rates. Secure your rates while you’re young and healthy.
- Work with a broker for rate comparisons: With numerous insurance companies in Canada, working with a broker ensures you get the best rates by comparing different insurers. The cost difference between the highest and lowest-priced insurers can be up to 30%!
- Avoid purchasing directly online: The best rates are still obtained through a broker. Buying directly skips the underwriting process, causing insurers to charge more due to unknown risks.
- Steer clear of mortgage life insurance: Despite offering a reduced death benefit and lack of beneficiary choice, mortgage insurance is more expensive than term insurance.
- Refrain from buying other loan insurance types: Such as line of credit and credit card insurance (balance protection insurance), which tend to be more expensive than term insurance.
- Don’t choose simplified or guaranteed issue life insurance if you’re healthy: These no medical life insurance options are pricier than fully underwritten policies. If you want to avoid a medical exam, many companies offer up to $2,000,000 of coverage without one.
- Bundle your insurance: Some companies offer other insurance products like auto and home insurance, and bundling could save you money.
- Purchase combination insurance: This type of insurance shares the same pool of benefits, potentially reducing costs. Manulife offers a product that combines life, disability, and critical illness insurance into one affordable package.
- Buy in bulk: Purchasing more coverage can save you up to 20% per $1,000 of coverage when you reach certain thresholds (e.g., $500,000, $1,000,000).
- Buy only what you need: Use a life insurance calculator to determine your needs and avoid over-insuring.
- Utilize a reliable life insurance calculator: Different calculators may underestimate or overestimate your needs, affecting your expenses. Choose a trustworthy calculator to ensure accuracy.
- Purchase through your corporation: Leverage lower corporate tax rates and buy life insurance with more affordable after-tax dollars within your private corporation.
- Take advantage of the capital dividend account: This account allows you to pay a tax-free dividend from your corporation, saving on taxes.
- Look for discounts and promotions: Insurance companies often offer deals, such as 10% off or free coverage for a limited time. Ask your broker about potential savings.
- Obtain more group life insurance: Optional insurance through your employer might be cheaper initially, but rates typically increase every 5 years.
- Use union or association membership for insurance: These group policies often have discounted rates but, like group life insurance, tend to increase every 5 years.
- Consider backdating the policy: Some insurers allow backdating the policy to save on premiums by being considered a year younger.
- Purchase within six months after your birthday: After six months, your age is rounded up, so buy in the first six months to maintain your insurance age.
- Get the guaranteed insurability rider: This rider allows you to buy insurance at a later date based on your current health, locking in your insurability.
- Obtain the disability waiver of premium rider: This waives your premium if you become disabled, providing financial relief if you can’t work.
- Acquire the children’s term rider: This low-cost option covers your children, and the cost remains the same regardless of how many children you have.
- Skip the accidental death rider: This rider provides an additional death benefit in case of an accident, but accidents account for a small percentage of all deaths. Plus, there’s no need for a higher death benefit for accidental death. Save your money by avoiding this rider.
Ways to Save During the Life Insurance Application
- Include a cover letter: Request your broker to create a cover letter for the underwriter to highlight your positive attributes, increasing the likelihood of a favorable outcome.
- Aim for preferred rates: Exceptional health and lifestyle choices may qualify you for preferred rates, potentially saving you up to 25% on insurance premiums.
- Utilize multi-life policies: Combine coverages for multiple individuals under a single policy to save on policy fees.
- Opt for annual payments: Choosing annual payments over monthly installments can save you around 8% in total costs.
- Complete the medical exam: If you’re in good health, undergoing a medical exam may help you secure preferred rates, even if coverage is available without it.
- Optimize your medical exam results: Schedule your exam early in the morning on an empty stomach, avoid caffeine before the test, and wear comfortable clothing to improve results. Research additional tips to ensure the best outcome.
- Disclose all relevant health and lifestyle information: Although it may not lower your premiums, full disclosure can prevent claim denials due to misrepresentation or fraud, protecting your loved ones financially.
- Provide comprehensive medical history details: Demonstrating that you have successfully managed and taken preventive measures against illness recurrence can lead to better insurance outcomes.
How Can I Improve My Health to Lower My Life Insurance Premiums?
Improving your health can be one of the most effective ways to lower your life insurance premiums. Here are some tips to consider:
- Quit smoking: If you are a smoker, quitting can significantly lower your life insurance premiums. Smoking increases your risk of developing a range of health problems, including cancer and heart disease, which makes you a higher risk for insurers. Quitting smoking can improve your health and reduce your risk, which translates to lower premiums.
- Maintain a healthy weight: Being overweight or obese can also increase your risk of developing health problems, which can lead to higher life insurance premiums. By maintaining a healthy weight through regular exercise and a balanced diet, you can lower your risk and potentially lower your premiums.
- Get regular check-ups: Regular check-ups with your doctor can help you identify and address health problems before they become more serious. This can help you maintain good health and reduce your risk of developing chronic health problems, which can lead to lower life insurance premiums.
- Manage chronic health conditions: If you have a chronic health condition such as diabetes or high blood pressure, managing it effectively can help reduce your risk and potentially lower your life insurance premiums. Work with your healthcare provider to develop a plan to manage your condition, which may include medication, lifestyle changes, or other treatments.
- Avoid risky behaviors: Engaging in risky behaviors such as excessive drinking or drug use can increase your risk of developing health problems, which can lead to higher life insurance premiums. By avoiding these behaviors and making healthy choices, you can reduce your risk and potentially lower your premiums.
By taking steps to improve your health, you can lower your life insurance premiums and potentially save money in the long run.
Affordable Life Insurance Options: Which Type is Right for You?
Term life insurance is typically the most affordable option, as it provides coverage for a set period of time and does not build cash value. Permanent life insurance, such as whole life or universal life, is generally more expensive but provides lifelong coverage and includes a savings or investment component.
To determine which type of life insurance is right for you, consider your personal needs and financial situation. If you are looking for basic coverage for a specific period of time, such as to cover a mortgage or other debt, term life insurance may be the most cost-effective option. If you are looking for lifelong coverage and a savings or investment component, permanent life insurance may be a better fit. Be sure to compare quotes from multiple insurance providers and review the coverage and benefits of each policy to find the best option for your needs and budget.
Saving money on life insurance premiums is a smart financial move that can help you provide the financial protection your loved ones need without breaking the bank. By taking steps to improve your health, choosing the right type and amount of coverage, shopping around for quotes, and working with a reputable insurance provider, you can significantly reduce your life insurance premiums and save money over the life of your policy. With these tips and a little bit of effort, you can enjoy the peace of mind that comes with knowing that your loved ones are protected in the event of your untimely death, without sacrificing your financial goals or peace of mind.
Frequently Asked Questions (FAQs) About Saving Money on Life Insurance Premiums
There are several factors that can impact the cost of life insurance premiums, including age, health, lifestyle habits (such as smoking), the type and amount of coverage you need, and the insurance provider you choose.
Improving your health through exercise, healthy eating, and regular medical check-ups can help lower your life insurance premiums. Quitting smoking and reducing alcohol consumption can also have a positive impact on your premiums.
Term life insurance policies are typically the most cost-effective option, as they provide coverage for a set period of time and do not include a savings component. Permanent life insurance policies, such as whole life or universal life, are generally more expensive but provide lifelong coverage and include a savings or investment component.
Yes, many insurance providers offer discounts for customers who choose to pay their premiums annually instead of monthly.
The amount of coverage you need depends on your individual financial situation and the needs of your beneficiaries. Reducing your coverage amount can lower your premiums, but it’s important to make sure that you have enough coverage to provide for your loved ones in the event of your untimely death.
Yes, many insurance providers offer discounts for non-smokers, healthy individuals, and customers who purchase multiple policies. Some employers also offer group life insurance programs that can be more cost-effective than purchasing an individual policy.
Yes, it’s possible to switch to a different life insurance policy or provider to lower your premiums. However, it’s important to carefully compare policies and providers to ensure that you are getting the coverage you need at a reasonable price.
How often should I review my life insurance policy to ensure that I am getting the best coverage for my money?
It’s a good idea to review your life insurance policy on an annual basis to ensure that you are getting the best coverage for your money. Changes in your health or financial situation may require you to adjust your coverage amount or switch to a different policy.
When choosing a life insurance provider, it’s important to consider factors such as the provider’s financial strength, customer service reputation, and the types of policies and coverage options available. It’s also a good idea to compare quotes from multiple providers to ensure that you are getting the best value for your money.
How much can I realistically expect to save on life insurance premiums, and is it worth the effort to shop around for the best deal?
The amount you can save on life insurance premiums will depend on a variety of factors, including your age, health, and coverage needs. However, shopping around for the best deal can save you hundreds or even thousands of dollars over the life of your policy, making it well worth the effort.
Find a solution for what you’re looking for
Saving money on life insurance premiums is possible by making smart choices and being diligent in your research, ultimately allowing you to provide the necessary financial protection for your loved ones without compromising your financial goals. At Protect Your Wealth, we work with and compare policies and quotes from the best life insurance companies in Canada to ensure the best solution for you and your needs. We provide expert life insurance solutions, including no medical life insurance, critical illness insurance, term life insurance, and permanent life insurance to build the best package to give you the protection you need.
To schedule a consultation about your income protection goals, or if you have any questions about insurance in Ontario or Canada, please contact Protect Your Wealth or call us at 1-877-654-6119 to talk to an advisor today! We’re proudly based out of Hamilton, and service clients anywhere in Ontario, British Columbia and Alberta including areas such as Kingston, Mississauga, Medicine Hat, and Nanaimo
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