Once you discover life insurance does not cost as much as you anticipated, you’ll be even happier to know that there are certain steps you can take to make certain that you end up buying affordable life insurance.
Wouldn’t it be a good thing to know those well-kept secrets that reduce your life insurance rates? The agents typically know how to keep your rates low but are they all sharing this information? Remember, agents are paid on a commission basis so the more premium a policy brings in, the higher their commissions will likely be.
Please don’t misunderstand, we certainly don’t maintain that agents won’t always act in their clients’ best interest. Some are just more knowledgeable than others when it comes to finding the “sweet spot” for your life insurance policy. Here, we’ll provide 5 tips for buying affordable life insurance.
Tip #1 – Buy Life Insurance Online through an Independent Agent
There are thousands of independent insurance agents out there with many of them doing business online through a website. Since independent agents represent multiple insurance carriers, you will not be forced into a cookie-cutter policy and your business with be shopped with all of the carriers they represent. Your independent agent should be experienced and reputable, and represent the majority of the highly-rated insurance carriers. Here are some additional recommendations:
-> Rather than going to multiple insurance company websites to get quotes, look for a site that represents and offers quotes for the major life insurance companies. The price is the same, whether you purchase a policy from the insurance company or a broker.
-> The website should offer quotes without asking for a lot of personal contact information. You’re only looking for quotes right now and shouldn’t have to give more than your name, phone number, email address.
-> When you enter your basic information, the website should show you quotes – not a list of companies that you can access to get quotes. Why should you have to enter your information twice (or 3 or 8 times)? The companies that will ultimately quote you are paying that website to be on that page. Why bother? Most of those companies can be found by searching Google, Bing or Yahoo?
-> Your quotes should be realistic and, therefore, should be based on your health profile. While no quotes are guaranteed, make sure your quote is based on the same underwriting criteria used by the insurance companies. If you must guess, be realistic about your health.
-> Make sure the website is staffed by insurance professionals who can answer your questions and assist you with the application and policy delivery, should you choose to purchase insurance. Many sites do not process applications or offer assistance during the underwriting period. Rather, they sell your information to several (sometimes as many as eight) life insurance brokers, who will try their hardest to reach you and sell you a policy.
-> Read the About Us section. If one doesn’t exist or it doesn’t tell you who you’re doing business with (I’ve seen a lot of these lately), you probably shouldn’t be doing business with them.
-> Before you enter any personal information, ensure that the web page you are on is secure. It should have a Secure Seal of some sort and the web address should start with https (rather than http).
There are many life insurance websites on the Internet, but only a handful of them meet all these criteria. Shop for the website first, then shop for insurance. While it might seem like it takes longer to do it this way, you will most probably save time, headaches and money in the end.
Tip #2 Know how much Life Insurance to Purchase
Figuring out how much life insurance death benefit you need to get can be quite challenging. Purchasing life insurance is an important decision, and it certainly isn’t one that should be made lightly. Selecting the correct amount of coverage is just as important as choosing the right type of policy. When you want to figure out how much life insurance is enough, a life insurance calculator can be very beneficial.
There are several different types of calculators available online. They’re free and easy to use. You can quickly and easily evaluate your life insurance needs using several different calculations, such as the human life value or multiple of earnings method. To get results, you’ll simply need to enter a few details about your goals, finances, and other relevant factors into the calculator of your choice.
Determine the Life Insurance Death Benefit with the Multiple of Income Method
Looking for the simplest method of determining how much life insurance is enough to provide protection for your family without getting into formulas? There are a number of different ways to calculate the proper amount of coverage. While many different variables can impact the amount of coverage you need, the multiple of income method can be a quick way to determine the minimum amount of coverage you might need. We do recommend though to take the minute or two to use the interest method described in these tips.
Life insurance calculator tip using multiple of income:
This technique for determining life insurance needed simply involves multiplying your annual income by a multiplier, based on your age at the time the policy is purchased.
- 25 years old? Choose life insurance valued at approximately 25 times your annual income.
- 35 years old? You’ll want to get life insurance that covers about 20 times your yearly earnings.
- 45 years old? Based on multiple of income method, it’s recommended that you get life insurance worth approximately 15 times your annual income.
- 55 years old? It’s a good idea to make sure that you’re life insurance policy is for an amount about 10 times your annual earnings plus any estate tax liability that may be due.
Calculating Life Insurance Needs with the Interest Method
There are several different approaches to figuring out how much life insurance is enough. The interest method is one of the most commonly used techniques for estimating life insurance needs. Simply think about how much money, on a yearly basis, your family would need to live comfortably. Once you have that number in mind, come up with a realistic interest rate you could expect to earn on invested money.
You can use these two figures – the amount of yearly income needed to live comfortably and a realistic interest rate – to calculate the minimum amount of life insurance you need. Divide the annual income figure by the interest rate, and the number you get represents the amount of life insurance you should get. The resulting figure provides the amount of cash that you’ll need to invest in an interest-bearing account to provide your family with the annual income they need. Example: Let’s say your family would need $100,000 per year and you feel that 5% is a realistic interest rate. Dividing $100,000 by 5% (.05) would come to $2,000,000 needed to provide $100,000. You can deduct any cash or liquid assets from the $2,000,000.
Eliminate Guesswork with Life Insurance Calculators
Looking for the best way to evaluate how much life insurance is enough? There are several different ways of estimating insurance coverage. The recommended method for determining coverage may vary significantly from one life insurance professional to another. When you want to be sure that you’re making the right decision about the amount of protection your family needs, it’s a good idea to use an online life insurance calculator.
Using a calculator can take the guesswork out of estimating your basic life insurance needs. Instead of using a single mathematical formula to evaluate insurance needs, life insurance calculators typically take multiple factors into consideration, such as inflation, interest rates, human life value, and other important variables.
Make sure that you are using a calculator provided by reputable sources. Be wary of calculators not provided by insurance professionals. Instead, use options provided by highly rated life insurance companies and online life insurance agencies. Their calculators are designed specifically to be tools for helping people make sound decisions about their life insurance needs.
Tip #3 Be Prepared before You Start Shopping
There are various considerations that you need to be aware of before you begin shopping for life insurance. At the top of the list is the easiest to determine. Why do you need life insurance and what do you want it to do for you?
Economic needs – Life insurance provides coverage for your family when end-of-life costs threaten their financial security. When shopping for life insurance, you should consider the types of liabilities that will have to be addressed when you are gone. If you think that these expenses might be too much for your loved ones to afford, you might want to consider some form of coverage.
Health needs – Your current medical condition can impact the affordability of life insurance, either positively or negatively. Certain plans may be the wrong choice depending on your needs, so it’s important to speak with an industry professional before making your final choice.
Duration of coverage – Depending on the situation, you might not need an open-ended policy like universal life or whole life insurance. Instead, you might want to opt for term life insurance, which protects you over a certain period of time, usually in “terms” of 10, 15, 20 or 30-year categories. If your needs for life insurance protection aren’t lifetime needs, term life insurance is probably the best choice for you.
Tip #4 Ignore the Myths about Buying Affordable Life Insurance
Have you ever gotten what you thought was great advice from a family member, friend, or coworker, only to find out it was useless? Most people are happy to give advice about life insurance but the problem is their advice is usually based on myths rather than facts. Here are a few tips that are really myths that you should ignore:
Life Insurance Coverage at Work Is Enough
Maybe, maybe not. If you have a spouse, dependents, or tax needs then additional coverage may be necessary. However, for a single person of modest means, employer-paid or provided term coverage may actually be enough.
You’re Single and Don’t Have Dependents, So You Don’t Need Life Insurance
I am a firm believer that even single persons need at least enough life insurance to cover funeral costs. Additionally, I believe that everyone should have enough life insurance to cover the cost of personal debts and unpaid medical bills at a minimum. If you are uninsured, you could potentially leave a legacy of unpaid expenses for your family or executor to deal with.
Your Life Insurance Coverage Only Needs to Be Twice Your Annual Salary
There is no cookie cutter answer for this. The amount of life insurance each person needs depends on their specific situation. In addition to medical and funeral bills, you may need to pay off debts such as your mortgage and provide for your family for several years. A cash flow analysis is usually necessary to help determine the true amount of life insurance you should consider purchasing.
Buy Term and Invest the Difference
Once again, there is not a cookie-cutter answer or approach for this. There are distinct differences between term life insurance and permanent life insurance and those differences can become even greater, depending on the company you purchase from. One thing is certain though, the older one gets, the higher the costs of term insurance becomes. If you know for certain that you must be covered at death, then you should consider permanent life insurance. I would also suggest comparing total premiums over the length of time you feel you need coverage so you are able to see the lifetime expense. Please do not be fooled and not address the insurability factor once your term policy expires. The risk of not being insurable later in life could be disastrous for those who may have estate tax issues and need life insurance to pay them.
Tip #5 Buy Your Life Insurance at LifeInsure.com
Fortunately, LifeInsure.com can meet the criteria we recommend you look for in an independent insurance agent. Our firm is experienced and reputable, and we represent all of the highly-rated life insurance companies which helps us deliver the best solution for your circumstances.