Life insurance can provide invaluable financial protection for your loved ones, but for many, cost is a major consideration. While the cost of life insurance varies based on factors like your age, location, the policy type, and more, securing an affordable policy may be easier than you’d think. Let’s walk through considerations you can keep in mind when shopping for life insurance to find the right rate for your circumstances and budget.
Common Misconceptions About the Cost of Life Insurance
Many people avoid purchasing life insurance due to common misconceptions about its cost. In reality, life insurance, particularly term life, can be quite affordable. Understanding the factors that determine premiums can help clarify how accessible and beneficial a policy can be.
Common misconceptions about the cost of life insurance include:
It’s Too Expensive: The most common reason people give for not buying life insurance is the perceived high cost. However, studies show that many consumers, especially younger generations, significantly overestimate the actual premiums—up to 12 times higher than the true cost.
You Don’t Need It If You’re Young and Healthy: People often believe they can wait to buy life insurance. However, the cost of premiums is heavily based on age and health. The younger and healthier you are, the less expensive the policy will be. Waiting to purchase a policy can lead to significantly higher costs in the long run.
You Can’t Get Affordable Coverage With a Health Condition: While certain health conditions can increase the cost of a policy, many insurance companies offer a variety of options for people with pre-existing conditions. Policies are designed to accommodate a range of health statuses, and some policy types, like simplified issue or guaranteed issue, may not require a medical exam at all.
Is existing coverage from your employer enough?
While life insurance through your employer is a great benefit, it’s often not enough to cover a family's financial needs. While experts recommend coverage equal to 10 to 15 times your annual salary, the median workplace policy may only provide one to two times your annual salary, and this coverage is typically lost if you leave the job. Purchasing an individual policy in addition to your employer-sponsored group coverage can help provide an additional level of financial security.
Choosing the Right Type of Life Insurance for Affordability
The type of life insurance you choose significantly impacts the cost and its suitability for family protection. The two main types are term life and permanent life insurance.
Term life insurance is often the most affordable option because it provides coverage only for a specific period, typically ranging from 10 to 30 years. This makes it an ideal choice for family protection because it allows young families and those with a limited budget to secure a substantial death benefit at an affordable cost. This coverage can be tailored to match the length of a mortgage, the years a child will be in school, or other major financial obligations.
Permanent life insurance, on the other hand, is typically more expensive. It provides lifelong coverage and includes a cash value component that grows over time. While the cash value can be borrowed against, the primary purpose for most families is not investment. The high cost of permanent life insurance can make it difficult for families to afford a death benefit significant enough to adequately protect against lost income and debts, which is the main goal for most families.
Term Versus Permanent (Whole) Life Insurance
Watch: Term Life Insurance vs. Whole Life Insurance
Strategies for Finding Truly Affordable Term Life Insurance Rates
To find affordable rates for term life insurance, you can focus on proactively managing the factors that are within your control. Premiums are primarily based on your risk profile, which includes your age, health, and lifestyle. By making informed choices, you can secure the coverage you need at a cost that fits your budget.
Here are some strategies to get the most affordable term life insurance rates:
Determine the Right Policy Length: While a longer term may seem safer, it is also more expensive. Choose a policy length that aligns with your financial obligations, such as the years remaining on your mortgage or the time until your children are financially independent.
Improve Your Health: Before applying, take steps to improve your health. Quitting smoking, managing blood pressure and cholesterol, and maintaining a healthy weight can all help you qualify for a more favorable rate class. Insurers may offer lower premiums to applicants with a healthy lifestyle.
Shop Around and Compare Quotes: Don't settle for the first quote you receive. Different insurance companies have varying underwriting guidelines, and one company may offer a better rate for your specific profile than another. A life insurance broker like SelectQuote can help offer unbiased comparisons between carriers.
Consider Policy Riders: Be mindful of additional policy riders, which are optional add-ons that increase your premium. While some riders may be beneficial, others may not be necessary for your situation. Only choose riders that provide a valuable benefit you cannot get from another source.
Why the Length of Your Term Policy Matters for Cost
The length of a term life insurance policy has a direct impact on the monthly premium. A shorter term, such as 10 or 15 years, is more affordable because the insurance company is assuming less risk over a condensed period. Conversely, a longer term, like 20 or 30 years, will have a higher monthly premium because it provides coverage for a longer duration, increasing the likelihood that the death benefit will be paid out during the policy's lifetime.
Understand the Medical Exam and Health Class Rating
A person's health and lifestyle are primary factors that affect the cost of life insurance because they directly relate to the risk an insurer takes on. A medical exam, which is part of the underwriting process for traditional policies, provides a detailed health profile that allows insurers to offer more accurate and often more affordable rates to healthy individuals. Factors like a person's cholesterol levels, blood pressure, and lifestyle habits like smoking or alcohol use are all considered, as are high-risk hobbies or occupations.
One option to bypass medical underwriting is instant life insurance, also known as no medical exam life insurance or instant coverage life insurance. These policies allow healthy individuals to secure coverage without a physical exam or an in-depth health history. If you’re 60 years or younger and in overall good health, you may qualify for up to $5 million in same-day coverage when you work with SelectQuote.
The Power of Comparison Shopping
An independent life insurance broker is a powerful ally in the search for an affordable policy. Unlike agents who represent a single company and can only sell their products, an independent broker (such as SelectQuote) works with multiple insurance carriers. This allows them to compare rates and policies from a variety of companies on your behalf, helping you find the right rate for your specific health and lifestyle profile. This ability to "shop the market" saves you time and money, maximizing the value you receive.
SelectQuote Can Help You Find Affordable Life Insurance
As we’ve covered, finding affordable life insurance may be easier than you think, especially when you work with a SelectQuote licensed agent. In just minutes, they’ll compare plans from trusted carriers to find the right fit for your needs and budget. Get started on your free quote—some policies cost less than $1 per day.
