Whole life insurance is purchased to provide a lifetime of financial security for one’s family in the event of one’s death, whether it happens unexpectedly or after a long life.
Unlike term life insurance, whole life provides protection up until the policyholder dies. It also accumulates a cash value that the policyholder can withdraw or borrow while still alive.
While it may seem obvious to secure the financial future of your loved ones, less than half of all Americans carry life insurance. Nearly two-thirds of those choosing to neglect life insurance coverage cite high costs as their primary reason, according to LIMRA.
But those individuals may be unaware of simple ways to control the premiums for whole life insurance.
Like with any form of insurance, rates depend on a variety of factors including your health, gender, occupation, age, coverage amount and place of residence. While you cannot change your age or gender, you can still take some simple steps to reduce your monthly premium.
Due to the nature of the dangerous habit, smokers are charged a high premium rate as they are a bigger risk towards the insurance industry. If you stop smoking for an entire year, you may qualify for a lower life insurance premium.
Life insurance companies also factor in driving record when determining premiums rates. This is because dangerous or reckless drivers pose a greater risk for insurance companies.
Don’t Do Risky Activities
While skydiving and rock climbing may seem like fun, frequent risky activities like these will increase your life insurance premium due to the nature of the activity.
Getting into shape and losing weight not only improves your health but also improves your chance of getting a better premium rate. As with smoking and risky recreational activities, insurance companies know obesity leads to a greater risk of premature death and therefore charge higher premiums accordingly. The opposite can be said about those who maintain a healthy, well-balanced diet and exercise regularly.
Insurance companies are in the business of making money, which means they offer competitive prices to draw in consumers. Nowadays it is not unusual to find similar policies offered at a variety of price points.
Buy the Right Amount of Coverage
A common mistake among consumers is paying too much life insurance coverage and not being able to make the premium payments. The key is to buy coverage that will cover your outstanding debts and provide for your family, not necessarily make them wealthy when you pass.
While spreading payments across 12 months may seem like a cost-effective way of cutting costs, you may actually be paying more for your policy. Insurance companies often hike up payment amounts if a policyholder pays monthly. They often lower total premiums when premiums are paid in full yearly rather than in monthly installments. Also, the fewer the payments, the less likely you are to acquire a late fee.
Ask for a Reassessment
If you have had a policy for a while and have made some improvements in your life, consider taking a new health assessment.
Want to learn more about life insurance? Read our article The Most Frequently Asked Life Insurance Questions.