Sound stressful? Don't worry! Here are five tips to help secure the best rate for you:
The three big factors all insurers consider are age, physical condition, and lifestyle. Even though women tend to live longer and historically have lower premiums, everyone should maintain healthy habits to ensure long, healthy lives, and lower life insurance rates.
Your BMI (Body Mass Index) or height-to-weight ratio is an important factor to watch as well. Being overweight or obese is linked to high cholesterol, high blood pressure, diabetes, and heart disease—all of which can shorten your lifespan and increase your premium.
Your prescription and other medication intake and family medical history can also affect the price of your premium. If you are concerned, keep in mind that health is something that most people can take steps to improve. Check-in with your doctor, nutritionist, and/or personal trainer regularly to kickstart your path to a better you. You can also find plenty of helpful resources in these areas online. Don’t let your current health prevent you from applying for life insurance.
Toying with the idea of vaping or marijuana? These substances are indeed gateways...to higher premiums. Just like typical tobacco smokers who pay an average of 306% more for their policies compared to non-smokers - you’ll be better off not even picking up these habits in the first place.
To appropriately price and manage risk, many life insurance companies will lump e-cigarettes with tobacco products. Some may give you lower rates for using nicotine patches or gum. And if you’ve recently quit—one or more years ago—you may qualify for a better price. The lesson here is that you could save thousands of dollars and live longer by quitting tobacco products altogether.
You may not be a racecar driver, but the need for speed can cost you big bucks. Most insurers will pull a Motor Vehicle Report (MVR) - factoring your driving performance over the last three to five years into their underwriting decision. Speeding tickets and parking violations are not as harmful as a DUI, but they can certainly add up. By following basic traffic laws at all times, you will be less likely to get into a fatal accident, and your driving record will have less of an effect on your life insurance premium.
Having good credit is another way you can help qualify for an affordable life insurance policy. Many insurance companies use credit score as a proxy for risk, so if you have excessive debt or have filed for bankruptcy, you may be considered “riskier” by your prospective life insurance provider. Just like being in good health—financial fitness will ensure that you can secure your family’s future with a budget-friendly policy. However, not all insurance companies use credit scores during underwriting so be aware that this alone does not promise a better rate.
The first step you should take on the road to financial fitness is maximizing your credit score. For example, it can take up to a decade for your credit report to stop reflecting bankruptcy. Instead of avoiding life insurance during that time, you may still be able to secure your family’s future by opting into a 10-year term policy. In general, it will be harder to secure a life insurance policy if you have a bankruptcy that has not been discharged yet. However, you may be eligible for some amount of coverage while it is still on your record.
Another tip for ensuring you can afford your life insurance premium is to build good budgeting habits. Working your monthly premium and other bills into a standardized budget can help alleviate a lot of money stress. If you have trouble managing expenses—and many of us do—consider meeting with a certified financial advisor or look into low-cost tools like Quicken, Mint, and You Need a Budget (YNAB). Discuss finances as a family to boost transparency and accountability for all purchases.
Through disciplined budgeting and building up your credit-worthiness, you’ll signal to a life insurance company that you are a prime candidate for coverage that could prevent your loved ones from financial disaster if you suddenly pass away.
Individuals who participate in activities deemed “risky,” like skydiving, spelunking, and flying airplanes, will likely have higher life insurance rates than those who do not. If you are healthy and don't engage in risky behaviors, you may be surprised by how low your price for term insurance can be. In addition to limiting or even avoiding dangerous hobbies altogether, you may want to reconsider your choice of occupation to keep your premiums low. Loggers, commercial fishers, construction workers, and even military personnel may face higher premium rates for life insurance.
Here’s a handy quote calculator to gauge the amount of coverage needed to support your dependents. If you’re still unsure, here’s what to keep in mind when purchasing your policy:
The amount of insurance coverage you need will depend on your income, expenses, and current assets. One way to estimate your insurance needs is to start with ten times your annual salary, then subtract any additional sources of income such as Social Security, savings, and pension benefits. The result is an estimate of the amount of life insurance coverage you might need. Of course, the number of dependents you have will play a significant part in the amount of insurance you’ll need, so keep them in mind. As you can imagine, the more coverage you get, the higher your premium will be.
Many of us overestimate the cost of life insurance. If you’re on a budget and are looking for coverage during your income-earning years, term life insurance might be for you! An affordable term life insurance policy is a great way to ensure your loved ones will receive a death benefit if you were to die younger than expected, and while your coverage is in force.
Term policies are an excellent option for those who want a low-cost life insurance plan that won’t cut into daily expenses. Since you’re not obligated to maintain the policy for life, you can select the term length that covers you for the years when your loved ones depend on your income-earning potential. For example, you may have a large mortgage and young children now, but in 20 years, your children will become self-sufficient, and your mortgage will be paid off. If you pass away during those 20 years, a term life insurance policy for a 20-year term could help pay off the mortgage and maintain the lifestyle of your family.
Along with plans to cover your final expenses, consider developing a robust estate plan. Doing so will help your dependents avoid probate, estate taxes, and excessive attorney’s fees after your death, while your estate is being settled.
Purchasing a life insurance policy when you’re young, healthy, and financially fit is a surefire way to protect your loved ones at your lowest possible rate. First, make sure that you are optimizing your physical wellbeing. Second, consider life insurance coverage that can protect not only what’s important today, but the type of future you’d want to leave behind for your family if you suddenly passed away. Finally, consider the kind of life insurance coverage that’s right for you. Term life is an affordable option that gives you the flexibility to customize your insurance coverage around your unique situation.