Life Insurance Basics,
Advisor Resources
Life insurance rates are generally affordable, especially for term coverage. But most people wonder how to save money on life insurance; they want to ensure that they are getting the most coverage possible for the least amount of premium. There are some simple ways to lower their premiums, whether they're shopping for the first time or already own a policy.
Save on life insurance when buying a new policy
When shopping for a new life insurance policy, there are several ways to help your clients save money on insurance premiums:
1. Buy life insurance as soon as they need it
As soon as your client knows they need life insurance, they should buy in order to lock in lower life insurance premiums. On average, the cost of life insurance will increase by 4.5 to 9% every year as one ages. When your client applies and buys when they're young and healthy, they can lock in those lower rates and save themselves a lot of money over the term of their policy.
2. Shop the market
Each life insurance company prices its coverage based on its own underwriting criteria, and that means that the price for the same coverage can vary widely from company to company. When you work with a marketplace like Policygenius Pro to help your clients find and buy insurance, experienced agents help them choose the company that is friendliest to their personal profile, ensuring that they get the best price. Some insurers, for example, offer better rates for people with diabetes, or people who have a history of cancer, or people who have had mental health diagnoses.
3. Choose term life insurance
The easiest way to save money when helping your clients buy life insurance is to recommend a term life insurance policy instead of a permanent life insurance policy. Permanent life insurance costs five to 15 times more than term life insurance. Term life insurance is simple insurance: your clients pay premiums for a set term, and if they die during that term, their beneficiaries get a set death benefit. Permanent policies are more complex financial products that can be useful for complex situations (like if your client has complex estate planning needs). But most people need term life insurance.
4. Lower the face value and/or the term length of the policy
If your client applies for a policy that delivers their ideal coverage, but their rates come back too high, they can lower the death benefit and/or the term length of the policy in order to lower the cost of their premiums. Their agent can help them find a sweet spot with the most coverage and longest term possible at a premium they can afford.
5. Opt to pay premiums annually
By paying life insurance premiums annually instead of monthly, your client can sometimes save up to 5% on how much they pay.
Questions or want to learn more?
Lower your clients current life insurance premiums
If your client already owns a life insurance policy, there are three things they can do to reduce their life insurance premiums:
1. Improve their health, then ask for reconsideration
Your client's life insurance rates rise as they age, but if they improve their health in the year (or more) after they buy their policy, they may be able to actually lower their rates. Reconsideration, also called rate reduction or re-rating, is when your client asks their insurer to look at updated medical records and medical exam results to lower their rate.
They can contact their insurance company to ask for reconsideration once they've owned their policy for one year. They'll have to take a new life insurance medical exam, and insurers will also want to see at least one year of progression in your client's health records from the time their policy was active.
For some conditions and hobbies, your client may want to wait even longer to ask for reconsideration. For example, smokers pay a lot more than nonsmokers for life insurance. The further away your client gets from their last cigarette, the higher the likelihood that they'll receive a lower life insurance rate. Generally, life insurance companies will consider your client a nonsmoker five years after they've successfully quit smoking, though each life insurance company has its own guidelines.
If your client applies for reconsideration and their insurer declines to give them a lower rate on their policy, they're still covered by them at the same rates that they were paying before. The insurer won’t increase their rates or cancel their policy. But if your client still wants lower rates, they can apply for a new life insurance policy with a different insurer to see if they can find lower rates elsewhere.
2. Re-shop their policy
While your client is applying for reconsideration with their current insurer, it may also make sense to re-shop the market for their policy. Their improved health condition could mean that they’d be eligible for an even lower rate from another insurer.
If they haven’t improved their health since they first applied, it likely doesn't make sense to ask for reconsideration, but it still might save them money to re-shop for life insurance, especially if they didn’t shop the market when they purchased their policy. It’s possible there’s an insurer who is friendlier to their health profile than their current insurer is.
3. Reduce their coverage amount
If your client had their policy for at least one year, they may be able to ask their insurer to lower the coverage amount of their policy, which would in turn lowers their premiums. This obviously is not ideal: your client bought the coverage they have because they need that coverage. But if they are considering forfeiting their policy unless they can lower their premiums, this could be a good way to keep some coverage.