Most everyone understands how important it is to own life insurance. In fact, over 50% of adults in the US have coverage right now.
However, it’s just as important to have the right amount of life insurance. Yet, statistics indicate that many insured adults feel they are probably underinsured because of life events after buying life insurance or simply because they cannot afford the premium for the coverage they need.
Easy Article Navigation
- What is Affordable Life Insurance?
- How to Find Affordable Life Insurance
- The Cheapest Life Insurance Policy really has to do with Your Age
- Most Affordable Life Insurance Policies
- Least Affordable Life Insurance Policies
- How Much Life Insurance do I Need?
- Frequently Asked Questions
The term affordable life insurance is thrown around quite a bit lately, and most of the time, it’s used as an advertising hook for life insurance companies that regularly advertise life insurance products on TV.
Here, we’ll discuss affordable life insurance to find out what it is and why it’s so important.
What is Affordable Life Insurance?
You would think that affordable life insurance is life insurance that simply fits within your budget. The issue with this line of thinking, however, is that term “affordable” has a different meaning for different people.
If you’re are a young, healthy adult who is starting a family and a career, “affordable” likely lies somewhere between $15 and $30 per month. However, if you’re a senior dealing with common health issues for your age group, “affordable” is likely somewhere between $60 and $80 a month.
Moreover, most adults erroneously believe that affordable life insurance is typically not available unless you’re super-healthy and live a healthy lifestyle. In reality, however, cheap life insurance rates can be found if you’re willing to put a little time into researching the companies offering it. And believe me, there are a ton of them.
How to Find Affordable Life Insurance
In reality, finding life insurance that can comfortably fit within your budget is easier than you think. Here are five pieces of advice that can help you accomplish your mission:
Buy a term policy – Term life insurance is the most affordable life insurance on the planet. The premium you’ll pay consists only of the cost of life insurance, an annual policy fee, and the cost of any optional riders you add to your policy.
Unlike whole life and universal life insurance, term insurance does not build cash value because the policyholder is only paying for actual life insurance. There are no monthly management fees, and the companies only pay commission on the first year’s premium rather than renewals.
Many insurance shoppers choose to ignore cheap term insurance because it’s considered temporary coverage. Still, when they learn about the conversion option that most companies offer, they quickly understand they can turn an inexpensive term policy into a permanent policy like whole life and not worry about any medical underwriting.
Buy early in life – Since the cost of life insurance is primarily based on an applicant’s age and health at the time of purchase, those who buy coverage early in life will benefit the most.
It’s easy to understand why life insurance companies prefer young and healthy adults because the chances of paying a claim under a term policy are so much lower than the claim probability of permanent insurance like whole life or universal life.
Buying term life insurance early in life allows the policyholder to enjoy low rates that are locked in for up to 30 years (35 and 40 years, in some cases) because the company cannot increase the premium if an insured becomes ill during the policy term.
Buy the right amount of coverage – Unfortunately, many life insurance shoppers end up underinsured because they didn’t consider all of the financial risks a typical family will face over the years.
Buying life insurance coverage based on a multiple of one’s income doesn’t make good financial sense because most individuals and families have living expenses combined with outstanding debt much higher than they believe they have.
When purchasing life insurance that is sufficient to help surviving loved ones to continue in the family home, deal with outstanding debt, fund one or more college educations, and a surviving spouses’ retirement plan, one or two multiples of your annual income will likely not cut it.
Rarely, if ever, has a life insurance beneficiary complained that they received too much money from a life insurance company.
Get instant quotes – Simply put, getting instant life insurance quotes is quick and easy. Today’s technology allows anyone to visit an insurance broker’s website and get term life insurance quotes from the majority of highly-rated insurance companies without any obligation to buy.
Why waste precious time visiting multiple insurance company websites when you can get the same rates shopping in one store? Independent insurance agents represent multiple companies that offer multiple products. It’s easy to use a cell phone to get rates without actually calling them.
Compare Quotes – Independent insurance brokers use a “comparative rate” to offer insurance quotes from multiple companies. This is 21st Century technology that allows an insurance shopper to find the best affordable life insurance rates from many companies at once.
You visit the site, answer a few questions, and bingo, you have life insurance rates from about a dozen insurance companies who are vying for your business!
Here’s a screenshot from an independent agent’s comparative rater for a 30-year old healthy male looking for a million-dollar term policy:
This screenshot represents the top 10 of 20 quotes offered. Just pick one and then fill out the application!
The Cheapest Life Insurance Policy really has to do with Your Age
We know that life insurance is primarily based on age, health, coverage amount and type of policy, but age typically holds the most weight when determining the rates for a life insurance shopper.
Here are the actual rates for a $500,000 20-year term life insurance policy by age group:
Age of Applicant
The above-listed rates are from Protective Life and subject to underwriting approval. Notice how the rates start climbing substantially after age 35? Buy term life insurance when you’re younger, and you’ll buy it much cheaper!
Most Affordable Life Insurance Policies
Although finding the most affordable life insurance policies has to do with your age, health, and the coverage amount, some companies compete more in certain age groups. This alone explains why shopping online and using a comparative rater is so important.
For example, you may like a particular company because their rates seem to always be the lowest, but after further examination, you discover that in some age groups, they are not as competitive and they are not as competitive for different types of policies.
Below, we’ve listed the most competitive insurance companies by policy type:
Term Life Insurance
Whole Life Insurance (Final Expense Insurance)
No Exam Life Insurance
Accidental Death Insurance
- Gerber Life
- Assurity Life
- Fidelity Life
- Mutual of Omaha
Notice how the companies listed differ in each life insurance category? The good news is that comparative rating services update their rating data regularly because insurance companies have a tendency to change rates based on claims experience.
Least Affordable Life Insurance Policies
With term life or any other type of life insurance, rates are calculated using the underwriting data required by the insurer.
When the insurance company is presented with low risk, the insurer will offer the lowest rates. However, when the risk is high or unknown, the rates offered will be significantly higher.
This will be especially apparent when insurance shoppers prefer not to have a life insurance medical exam or, because of severe or multiple health issues, are forced to buy a guaranteed issue (guaranteed acceptance) policy.
In either of these instances, there are companies willing to offer no exam or high-risk insurance policies but not as many, which means less competition and higher rates to choose from.
For example, many seniors are forced to buy guaranteed issue life insurance because they cannot medically qualify for standard or traditional life insurance. In this, the guaranteed issue policy will have much higher rates and a waiting period during which the insurance company will pay out a modified death benefit (typically 110% of premiums paid) if the insured dies from natural causes.
Because of the higher rates and the waiting period, we always recommend that applicants only choose this type of life insurance as a last resort. Regretfully, most TV insurance companies like Colonial Penn or Lincoln Heritage prefer to convince most applicants to purchase guaranteed issue life insurance.
How Much Life Insurance do I Need?
Planning for your family’s financial future can sometimes be difficult. The volatile nature of the stock market and uncertainty about employment can complicate your determination about how much life insurance you may need. It’s common for some individuals to purchase a life insurance policy based on how much they think they will earn in the future, but is that really a wise idea?
Most financial planners advise that the death benefit of a life insurance policy should be worth 10 to 12 times the insured person’s current annual income. If you have a good reason to believe that your income will increase significantly in the future, it’s not a bad idea to base your coverage off of that figure. This will allow you to possibly lock in lower rates now than you would be eligible for later.
Having an expectation that your income will increase in the future means more than just thinking you’ll get a raise or find a better job. In our current economic climate, making such predictions is risky. However, there are a few examples of people who are almost guaranteed to increase their income and would benefit from purchasing a life insurance policy based on future earnings.
Medical residents can realistically expect their income to at least double once they are able to practice as physicians. In addition, career public-sector employees who are eligible for promotions based on seniority will usually know what their salary will be five, 10 or 15 years from now, because this information is available to the public.
It is important to remember that the purpose of life insurance is to take care of your family in the event that something tragic happens to you. While you want to protect their future financial security, you also don’t want your life insurance policy to lapse because you never got that promotion and can’t keep up with the payments.
When considering how much coverage you need, you should think not only about your current income, but also the following:
- Educational expenses – This can be a hard thing to predict, especially if your children won’t begin college for at least another decade, but you can estimate the cost of this by figuring out the average annual increase in college tuition.
- Final expenses – At the very least, your family should have enough money to pay for a funeral and burial or cremation. This cost of this can range from $10,000 to $20,000.
- Mortgage and other debts – Car loans, student loans, credit card bills and other forms of consumer debt can be a burden on survivors. Your life insurance policy should provide enough to pay off these debts entirely. A mortgage, however, may not necessarily need to be paid off, especially if the interest rate is low.
Frequently Asked Questions
What is the average monthly cost of life insurance?
Since life insurance rates are based on age, health, amount of coverage, and type of insurance, it is extremely difficult to provide the average monthly cost. However, you can instantly determine your cost for life insurance by using our online life insurance comparative rater.
What is the cheapest type of life insurance?
The cheapest type of life insurance is accidental death insurance, but it only pays if you die from an accident, and most people don’t. The cheapest type of life insurance that pays for death resulting from natural causes and accidents is Term Life Insurance.
What factors have the biggest impact on the cost of life insurance?
There are five primary factors that will impact your life insurance rate:
- Your age
- Your health
- Your lifestyle
- The coverage amount
- The type of life insurance
What is the most affordable life insurance policy for young adults?
The most affordable life insurance policy for young adults is a 10 or 20-year Term Life Insurance policy.
What is the most affordable life insurance policy for seniors?
Typically, seniors prefer to buy permanent life insurance that will provide coverage for the rest of their lives. In most cases, the most affordable life insurance policy would be level benefit Final Expense insurance.
Get an Insurance Affordable Life Insurance Quote
To get an instant quote from multiple insurance companies, LifeInsure.com offers an online comparative rater. However, if you have questions about which type of policy is the right fit for your circumstances and budget, you can call us at 866-838-0099 during normal business hours or contact us through our website 24/7.