If you shopped for life insurance regularly, you would become an informed consumer and learn the life insurance hacks and tricks to help you get the best value for your money. But most of us rarely buy life insurance, maybe just once in a lifetime, and we may never know if we’ve made mistakes along the way.
10 Life Insurance Hacks
Here are ten life insurance hacks buying strategies, known to industry experts, that can help you hack your way to lower prices or better coverage.
1. See if buying more can cost you less
You can buy groceries in bulk at a discount, so why not do the same when buying life insurance? Insurers often have thresholds where the “cost per thousand dollars” of coverage drops, sometimes dramatically. What this means for you: Your annual premium may be lower if you take out a larger policy.
“It’s not a gradual price drop from $100,000 to the next $100,000,” said Chris Huntley, director of marketing for JRC Insurance Group in San Diego. “There are bands and companies offering price discounts at certain levels.”
In practical terms, if an insurer’s price discount is $250,000, that means a $250,000 policy may have a lower premium than a $225,000 policy. But the bandwidths are not the same for all companies, Huntley emphasizes. Some have discounts of $250,000, others of $500,000, and others of $1 million in coverage. Huntley says you need to find the sweet spot for your life insurer’s death benefit.
It’s also smart to round up to the next $100,000 when you get quotes. For example, if you are looking for a $450,000 policy, request a $500,000 quote as well. An experienced broker will do this without being asked because he is familiar with the price ranges.
Even if you’re looking for a small policy with less than $100,000 coverage, make sure you get a $100,000 life insurance quote. Because there’s more competition for customers who want coverage of $100,000 or more, you’ll almost always get a better deal, Huntley says. So, buying more for less is one of the life insurance hacks you should consider when buying life insurance.
2. Work with an independent agent
A do-it-yourself approach to buying life insurance by shopping online is a great option for many consumers. But if you are not in perfect health, this may not be the best option. Insurance companies apply wildly different prices to different medical conditions and other risk factors.
“In life insurance, the name of the game is the better health rating you can get, the better the premium,” Huntley says. “You want to go to the carrier that is most forgiving of your health condition.”
Independent agents will search the market for you to find those insurers. They can also find the most “friendly” insurers with a high-risk profession, foreign travel plans, or anything else that could affect your rate.
3. ‘Ladder’ Policy to Meet Financial Obligations
When looking for term life insurance, you generally want a term policy that lasts long enough to cover your longest financial obligation. For example, if you want to cover a mortgage that will last for another 27 years, you take out a life insurance policy with a term of 30 years.
But what if your major financial obligations end at different times over decades? Instead of buying one very large policy to cover everything, you can buy multiple policies of different maturities, each coinciding with the end of a large debt or other financial need. This is often referred to as dizzying, layered, or dizzying. The amount of coverage of each policy would reflect the money needed to pay the specific obligation.
Suppose you are 35 years old and have 15 years left on your mortgage. You can buy two policies:
- A 15-year policy to cover the mortgage.
- A 30-year policy to cover income replacement until you retire at age 65.
This way you are not overinsured by paying for a large policy that covers debts that are long gone when the policy expires. Permanent life insurance, which lasts as long as you live, can also be part of the ladder. If you’re considering scaling up, consult a financial advisor to help you plan.
4. Add a chronic disease rider for free
A rider is a way to add extras to your life insurance policy. Huntley says most riders aren’t worth the price, but he recommends one: a rider with chronic conditions, which some insurers offer for free. Availability is mainly limited to permanent life insurance.
With this rider, if you experience a chronic illness, you will have early access to your death benefit. It does not add extra money to your policy; instead, you can withdraw your benefit while you are still alive. Your beneficiaries would receive the rest. (This is different from a long-term care rider.)
This is better than an “accelerated death benefit”, which only gives you access to the death benefit if you are terminally ill. The chronic illness clause applies to more conditions, although a doctor may need to confirm that the condition is likely to persist for the rest of your life.
5. Attach a check to your application
You don’t have to wait for your life insurance policy to be issued to ensure coverage. The underwriting process can take several weeks, especially if your insurer has to wait for your doctor’s office to send medical records, or if the insurer wants additional information.
In the meantime, you can get immediate “temporary” coverage by submitting your first month’s premium payment with your life insurance application. Look for the “Proof of Term Life Insurance” included with your application, which contains the fine print of the rules for temporary coverage.
By submitting the first month’s premium, you ensure that your beneficiaries have insurance protection while you wait for the application process to begin.
Also, if you plan to pay your life insurance bill annually in the future, you only need to submit one month of premium to take advantage of term life insurance. However, you don’t have to do this.
6. Given the benefits you want:
The next life insurance hacks is to buy what will benefit you. If you simply automate your premium payments and policy renewals without even verifying or revising your installment plan, you’re missing out in two ways. First, you may be charged for benefits that you do not want or benefits that are no longer relevant to you. The second way is that you miss out on certain additional benefits that you could qualify for at a nominal price.
For example, certain term life insurance policies1, such as accidental death, may be essential to make your insurance policy more comprehensive. This can suddenly become relevant to you, even if it wasn’t before if you have a new job that requires you to travel a lot. Therefore, check your insurance policies to make sure they are up to date with your current needs.
7. Choose a smart policy term
One of the biggest benefits of taking out term life insurance is that it helps your family get on with their lives financially. A term plan, if chosen strategically, ensures that your family does not have to give up their standard of living or deal with the burden of debt left behind. So if you’re thinking about how to smartly buy life insurance, one of the most important insurance tricks is choosing the right policy term.
In general, you should get term life insurance with a longer term than the debt you’re paying off or the life milestone you’re planning. For example, if you have a home loan that will be paid by EMI over the next 23 years, you should get a 25-year term plan. The same goes for a family goal such as raising their children. If your children are still 10 to 15 years away from graduating from university and moving on to higher education, you must have a term policy for at least 15 years.
8. Check your deductible
If you are hospitalized or have had an accident, you must pay an amount in advance before you can use the insurance. This amount is known as the deductible. The higher your deductible, the lower your premium, and vice versa. The trick is to balance the deductible with the premiums. You must ensure that the deductible is not a burden for you or your family should something happen.
9. Don’t let your policy expire
Another life insurance hacks is to never let your policy run out. If you run out of money or at any time forget to pay the premium, you run the risk that your policy will expire. This results in a negative insurance score. If you approach a company to renew your policy, you may have to pay higher premiums. To avoid this, you need to know when your premium is due. If you have any problems paying your premium, please contact your insurance company and discuss the possibility of avoiding any deferral or partial payment so that your policy does not expire.
10. Consider Plans With Annual Premium Options
There are schemes where you can choose to pay the premium annually. With monthly payments, you lose a significant amount of service fees that are charged every time you make payment. Paying more for your insurance at the end of the year may sound daunting, but it’s not. If you compare it to the net amount you pay to your insurance company every month, it will be less. You can invest the money, save somewhere else, or plan a vacation. If you have a credit card with a refund option, you can use it to pay your annual premium. You will have the opportunity to earn more discounts on a larger amount.
Life Insurance Hacks: Avoid These Mistakes to Get the Best Life Insurance
When people buy life insurance, they often don’t know exactly how much coverage they need. This can lead to problems because they don’t know how much money they have to lose if something happens to them.
The best life and savings insurance for you is not just about choosing the right policy, but also about choosing the right company. In this section, we look at some of the common mistakes people make when buying their life insurance policies and how to avoid them so you can get the most out of your policy.
Without Knowing What You Need
The first mistake people make when buying life insurance is not knowing how much coverage they need. This can be a problem because it means they don’t know how much money they have to lose if something happens to them. If your goal is to protect your family and loved ones from financial hardship should something unexpected happen to you, then adequate coverage is essential.
Ignore the needs of your family
Life insurance is not just for you, but for your family. Your loved ones will enjoy your life insurance and they should know about it. They need to know how to access the money in the event of your death, what happens to your inheritance if you pass it on to them, or even how much money they can receive if something happens at work and they have no income.
Not reviewing your current life insurance plans
You want to make sure you get the best deal and coverage for your money. It is important to review your current life insurance policies every year, or at least once a year. You can do this by going online and checking out all the different companies that offer life insurance plans in your area.
You may also want to consider tracking these changes over time; after all, some companies change their rates or package every five years! This way you know if there have been major changes since last year and what those changes mean for you to make it easier for both parties.
Not understanding the definition of ADL (Activities of Daily Living)
One of the most important things you can do for yourself is to understand what ADLs are. ADLs are basic activities that most people can perform without help from others and include bathing, dressing, eating, going to the toilet, transferring, and continence. If you have a disability or medical condition that prevents you from performing these tasks on your own, it’s important to consider life insurance with an inclusive coverage limit, as it provides financial support when needed.
Failure to check the financial stability of the company
Also, check the financial stability of the company. This means you need to know if your finances are sound and what kind of liability you have.
You should also check the financial health of your insurer by finding out how much it has paid out in claims over time. If a company has paid large claims, it may indicate that it is less likely to be able to pay claims in an emergency than a company that has not paid as much money because it is more financially stable.
Conclusion – Life Insurance Hacks
We hope this life insurance hacks article has given you a better understanding of how important it is to choose the right life insurance policy for you. Following these tips will make it easier in the long run to get the best life insurance policy.