Cheap life insurance: All You Need to Know

Life insurance is a contract between an insurance policyholder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money upon the death of an insured person. 

Depending on the contract, other events, such as terminal illness or critical illness, can also trigger payment. The policyholder typically pays a premium, either regularly or as one lump sum. The benefits may include other expenses, such as funeral expenses. 

In the process of defining the value of life insurance, which primarily differs from other types, we delve into factors such as the type of policy, coverage amount, your age, health, and other personal circumstances. 

This article will explain cheap life insurance, including whole life and term life insurance and much more, to help you get a life insurance policy without breaking the bank.

Cheap life insurance

Image source

Table of Contents

    Explaining Cheap Life Insurance

    This insurance type is an important financial tool that provides protection and ease in the event of any death occurrence. Nevertheless, the notion of committing to regular insurance premiums may appear disconcerting to certain individuals, making the cheapest life insurance companies an appealing choice for many. 

    Cheap life insurance, often synonymous with term life insurance, takes centre stage in our analysis due to its cost-effectiveness. It is a type of policy that is affordable and has low insurance payments. It gives you a fixed premium for a specific period, such as 20 years. At the end of this level term period, you will usually have the option to renew the policy at a higher premium each year after. However, these renewal rates can quickly become too expensive. It is best to buy the right policy length to start with, so you will not end up with high renewal rates or shopping for another policy. 

    Which life insurance is the cheapest?

    Talking about cheap life insurance, we refer to policies that offer satisfactory death benefit at an excellent value. There are some basic types that commonly fit this description:

    Term Life Insurance 

    The term life insurance, is frequently the most budget-friendly choice, offering coverage for a predetermined duration, which can be 10, 20, or 30 years. If you pass away during the term, the policy pays a death benefit to your beneficiaries.

    If you outlive the term, the coverage expires and you lose out on your money. This type of premiums are typically lower, compared to other types of policies, making it an attractive choice for those on a budget.

    Guaranteed Universal Life Insurance 

    This type of policy offers lifelong coverage with a fixed premium, making it more affordable than traditional types. Guaranteed universal insurance is often suitable for those who want permanent coverage without excessive costs.

    Whole life insurance 

    While this type may be considered more expensive than the others, its benefits significantly outweigh the costs when used right. This policy lasts for the entire life of the insured and has a cash value component with living benefits which the insured can enjoy while alive. Whole life insurance is a type of permanent coverage that can also help you meet financial obligations with certain strategies.

    Tips for Finding Affordable Life Insurance

    • Assess Your Needs: Begin by determining how much coverage you need. This can help you avoid over-insuring yourself, which would lead to higher premiums. Permanent life insurance tries to solve this problem by having a cash value component with guaranteed death benefit.
    • Shop Around: Compare quotes from different life insurance providers. Rates can vary significantly, and getting multiple quotes will help you find the best life insurance companies.
    • Consider Term Length: Choose a term length that aligns with your financial obligations. For instance, if you have young children, a 20- or 30-year term might be ideal to cover their upbringing.
    • Maintain Good Health: Your health significantly impacts life insurance premiums. Staying in good health by eating well, exercising, and regular check-ups can help you secure lower rates. 
    • Use Riders Wisely: Riders are additional benefits you can add to your term life insurance policies or permanent life insurance policies for extra coverage. While some may be necessary, be cautious not to overburden your policy with unnecessary riders, as they can increase costs.
    • Bundle Policies: Many insurance companies offer discounts when you bundle life insurance with other policies, such as auto and home insurance. This can lead to significant savings.
    • Quit Smoking: If you are a smoker, consider quitting before purchasing life insurance. Smokers pay higher premiums. After a certain period of being tobacco-free, you may take a medical exam and qualify for non-smoker rates.
    Cheap life insurance

    Image Source

    In searching for the cheapest life insurance companies, make sure the company has a solid financial standing and positive customer reviews to ensure reliable service. Additionally, research the underwriting process of each company to understand how they assess factors like health and lifestyle, as it can impact the final premium rates.

    Seeking recommendations from friends, family, or trusted advisors can also give you valuable insights.

    Factors Determine Life Insurance Rates

    A person’s life insurance cost is basically determined by a few factors, starting from your age, gender, and health, among other factors.

    Below are a few main factors that affect life insurance rates:

    Age 

    As one grows older, the cost of securing a new life insurance policy increases. In an instance, the purchase of a term life insurance policy at the age of 50 could lead to premiums that are potentially double the cost of a similar policy acquired at the age of 30. As you age, the cost of obtaining a new policy increases, and term life insurance at age 50 could potentially be 200% more costly than a policy obtained at age 30.

    Gender

    Male individuals typically face higher life insurance costs due to their shorter average lifespans. For instance, a 30-year-old man will pay approximately 19% more than a woman of the same age for a $500,000, 20-year term life insurance policy. 

    Health history 

    Life insurance companies usually look at your medical history and often require a medical exam. This exam is similar to what is carried out when buying a health insurance.

    Lifestyle 

    Nicotine use (including smoking, patches, and gum), dangerous jobs and hobbies, your driving history (such as a DUI conviction) and a criminal record can increase your life insurance quote. Many life and health insurance companies asses this when setting your policy.

    Term length 

    A shorter term will cost less, but you will lock in your life insurance rates for fewer years. A 30-year term costs about 90% more than a 10-year term but covers you for triple the number of years.

    How much life insurance to get

    When calculating how much term life or permanent life insurance you need, add up the financial obligations you want covered after your death and subtract existing assets that could be used by your family. Examples of financial obligations may include income replacement, a mortgage, future college tuition bills and credit card debts. Assets may include savings and existing policies you have.

    The amount of insurance you get also depends on how many affordable life insurance companies you found within your budget. Cheap life insurance companies can be found if you search in the right places 

    How to Get Cheaper Life Insurance

    You can find cheap life insurance quotes by taking the right steps when shopping and applying for a policy. 

    Know the basic pricing assumptions for term life insurance

    There are three basic pricing assumptions:

    Mortality:  Most life insurance companies use their own proprietary mortality experience based on their own internal set of statistics. Corporate mortality will most likely always be more favourable than Commissioners Standard Ordinary (CSO) tables as a result. In rare cases some life insurance companies have recently increased policy mortality costs on existing business segments due to much lower than anticipated investment returns. 

    Assumed Net Investment Return; Current industry average return of 5.5% Annual Yield by the life insurance company. In the early 1980s interest/return assumptions were well over 10% to be sustained over the life of the policy.

    Internal Administrative Expenses: Generally, these are proprietary figures which include, mainly, policy acquisition costs and general home office expenses.

    These pricing assumptions are universal among the various types of individual life insurance policies. It’s important to understand these components when considering term life insurance because there is no cash value component in this type of policy. 

    Buy a Term Life Insurance Policy 

    You have two main options when buying life insurance: term life insurance and permanent life insurance. A term life policy provides fixed rates for a certain period, such as 10, 20 or 30 years. A permanent policy, on the other hand, can provide lifelong coverage. Under permanent policy, we have universal life policies, variable life policies, and whole life insurance policies.

    Secure the policy at an earlier stage 

    Life insurance providers consider your age and health as crucial elements in calculating your death benefit. The younger and healthier you are, the more affordable your whole life insurance policies and term life coverage will be. To obtain cost-effective policies, it’s advisable to make the purchase sooner rather than delaying.

    Also, you can lock in the cheap life insurance rate for the term length of your policy. Once you purchase life insurance, your rates cannot go up based on changes to your health or other factors. Too often people think they have time to make more room in their budget or get in better health before buying a policy. However, the pricing you get will only go up each additional year you wait to apply. Plus, you risk developing health issues as you age, which will further increase your quotes.

    Create a Ladder of Life Insurance Policies to Get More Coverage for Less

    The amount of coverage you acquire is a key factor that impacts your life insurance costs. It’s crucial not to compromise on coverage to lower costs. You should obtain a sufficient level of insurance to ensure the financial security of those who depend on your assistance.

    Once you know how much policy you need, you can potentially keep down the cost of coverage by using a strategy called laddering. To build it, you buy a few smaller policies that expire at contrasting times, rather than one large policy to cover you for a few decades.

    It can allow you to have more life insurance coverage initially—perhaps when your children are young, or you owe more on a mortgage—then taper off with time as your needs decrease. During the first 10 years, you would have a combined affordable coverage worth your customer satisfaction. However, the amount of coverage you have will decline as your policies expire, but the amount you pay will also drop over time.

    Avoid Unnecessary Riders 

    When you buy term life or permanent life insurance policies, you typically have the option to get additional features called riders. You can add riders that allow you to waive premium payments if you lose certain physical abilities, add coverage for your minor children, and the list goes on. Although the extra coverage might be appealing, you can get the cheapest life insurance options by avoiding riders you do not necessarily need.

    Avoid Guaranteed Issue Life Insurance If Possible 

    A guaranteed issue life insurance policy looks convenient because there is no medical exam, and you cannot be turned down. Unfortunately, it is also an expensive way to buy life insurance policies. Because the life insurance company has no information about you, it charges a high rate.

    If you are healthy, you can get a much better rate by going through a traditional application process that involves health questions and a life insurance medical exam. There are now many no-medical exam life insurance options that are competitively priced, thanks to technology that quickly assesses your personal information from third-party data sources. 

    Shop Around for Life Insurance; 

    It is easy to get life policy quotes, and quotes are free. Compare rates from at least a few life insurance companies and bear in mind that what you will get online are an initial estimate. Many people discover that their final quote is higher after the application process because the life insurer has been able to fully assess information about you. So, work with an independent insurance broker who collaborates with several insurance commissioners and financial planning services, who will know which top life insurance companies are likely to give you the cheapest life insurance quotes based on your life expectancy.

    Lower Your Death Benefit 

    Opting for any level of policy coverage is preferable to having none. Therefore, if the premiums for a policy that matches your preferred death benefit are beyond your financial means, it’s worth contemplating a reduction in the coverage amount you purchase.

    For example, individuals who consume nicotine products typically face higher costs compared to non-users. Let’s suppose you’re a smoker, and the expenses associated with a life insurance policy providing a $500,000 payout are out of your budget. Even if this is the amount of insurance you believe you require, contemplate the possibility of acquiring a policy with a $250,000 death benefit.

    You may discover that you are at ease with the premiums for a policy offering a reduced payout, thereby still offering a level of financial support to your beneficiaries in the unfortunate event of your passing.

    Group and Free Life Insurance 

    Group life insurance is another way to get cheap or even free life insurance coverage. It is usually offered through a workplace, and you are provided basic coverage without a medical exam. Group life insurance is normally less expensive than individual life insurance because the employer often covers all or most of the cost. But if you leave the job, you will typically lose your life insurance coverage—unless the policy is portable.

    Pros and Cons 

    ProsCons
    Easy to sign up for at workCoverage is typically tied to employment
    Convenient – no medical exam for basic coverageLow death benefit amounts
    Usually free or incredibly low cost to the employeeYou may need to provide medical information if you want to buy more than the base amount.

    Whole life policy

    Unlike term life insurance policies, permanent policies like whole life are the only life insurance worth getting if you want to enjoy living benefits. Both universal life and whole life policies offer accelerated death benefit which ultimately boosts customer satisfaction.

    These permanent policies may be more expensive than term life in the short run, but they have more advantages to the insured and their beneficiaries.

    When choosing between whole life and universal life policy, consider how they accumulate cash value and their interest rates. 

    Recap

    Getting a cheap life insurance is attainable with the right approach. By having a solid understanding of your requirements, researching affordable life insurance companies, and adopting healthy lifestyle practices, you can save money and maximize your customer satisfaction.

    Keep in mind that purchasing insurance, especially for life, is a lasting commitment. Seek out professionals to help you start right.