How to find affordable life insurance
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- It's easier and cheaper to get life insurance when you're young and healthy.
- If cost is a concern, get as much life insurance as you can afford now and consider increasing coverage later.
- For those with a health condition or on a fixed income, consider no medical exam life insurance, which limits your coverage amount but also your price.
- See our picks for the best life insurance companies »
Life insurance is something you typically don't think about when you're in your 20s. However, purchasing life insurance while you're young and healthy is the right time to get the best rates.
The cost of life insurance premiums can be a concern if you are on a fixed income, but there are affordable life insurance options for every budget. If cost has prevented you from purchasing life insurance, start by getting as much as you can afford. You can increase coverage or add a policy later.
If you're looking for affordable life insurance, consider the following options:
Opt into employer-provided group life insurance
It is best to get as much life insurance you can afford. Typically, most employer-provided group life insurance is no-cost or is low-cost for you as the employee, making it an affordable option if it's available through your workplace. In fact, it is probably the cheapest life insurance you can get — but remember: You can't take it with you when you leave the job. Check with your human resources department to find out what is offered.
When selecting your death benefit amount for life insurance, the rule of thumb is to select 10 times your annual income to cover the mortgage, education for dependents, and other costs if you die. For example, if you make $75,000 per year, then you would purchase a life insurance policy for $750,000.
Most employers offer some sort of group life insurance that is usually equal to your salary. However, your employer coverage may not be enough. Additionally, if you leave your job, you lose your coverage. So while employer-provided coverage is a good affordable option, it's not ideal on its own. It is smart to have an individual life insurance policy, either in addition to your employer coverage or instead of it.
Buy a term policy early in life
There are two types of life insurance: whole life and term life. Whole life premiums can be more expensive than term life premiums because they have a cash value component in addition to the death benefit. Term life, on the other hand, is considerably cheaper.
Term life insurance covers a 10, 20, or 30-year period. If you die during that period, your beneficiaries get your payout — known as the death benefit. Term life insurance is generally recommended for any adult with a dependent.
The biggest draw of term life insurance policies is the low monthly payments, which are determined by the insurance company after evaluating a person's age, gender, health, and sometimes driving record, job, hobbies, and whether or not a person smokes. Oftentimes, you'll need to submit to a medical exam.
The cost of coverage varies by company, by policy, and by policyholder. We got sample quotes from a few insurers' websites to compare rates for a healthy 35-year single, non-smoking female living in Illinois, in excellent health seeking a $250,000 policy with a 30-year term. Our hypothetical policyholder can expect to pay about $30 per month:
|Company||Sample monthly premium for a $250,000 policy with a 30-year term|
How to find affordable life insurance over 50
It's easier and cheaper to get insurance when you're younger and healthier. That doesn't mean that you can't get insurance as you age, but it probably means that you will have limits on your death benefit amount.
No medical exam life insurance and funeral insurance are available to everyone. However, they are usually marketed for those over 50 because there is a limit on the coverage amount — usually less than $50,000. Plus, it's relatively inexpensive, which works well for someone on a fixed income, like a retiree.
No medical exam life insurance
No medical exam life insurance offers quick approval for coverage and can be good if you have are in poor health.
Traditional insurance policies require a medical exam as part of the approval process known as underwriting. Whether you are concerned about a medical exam disqualifying you or simply just don't want to go to a doctor, there are a few types of no medical exam life insurance policies: accelerated underwriting, simplified issue, and guaranteed issue — referred to as "final expense/funeral insurance."
Although no medical exam is required for a simplified issue life policy, you still have to complete a health questionnaire and provide access to medical records. According to Fidelity Life, if you fail to disclose a condition and die, the insurance company can deny paying death benefits to your beneficiaries.
For no medical exam life insurance, much depends on your health, age, and coverage amount. The healthier you are, the cheaper the premiums. However, most no medical exam insurance has limits on coverage amounts that vary by insurance provider.
It is best to shop around online, or even check out those guaranteed life mailers that might arrive in your mailbox. Most of these offers are for low coverage amounts, but some coverage is better than none at all.
Funeral 'final expense' insurance
Funeral or burial insurance is also known as "final expense" insurance. Les Masterson, managing editor of Insure, told Business Insider that funeral insurance is different from traditional life insurance in three ways:
- It has a lower death benefit, making it less expensive and a good option if you're on a fixed income
- It's easier to get this policy — no exam required
- It is often purchased by people who are middle-aged or older
Masterson noted that the median price for a funeral is $8,500, and death benefits for funeral insurance can fall anywhere from $5,000 to $25,000. Some plans, like AARP, offer a higher death benefit — up to $100,000.
According to ColonialPenn, there is usually a two-year waiting period, meaning that if the policyholder dies within the first two years of having coverage, the policy won't pay out.
If you can afford more coverage, add disability and long-term care insurance
Life insurance protects your loved ones if you die. However, there are other types of insurance products that protect you while you're still living: specifically, your income if you become disabled due to illness or injury, and your well-being as you age.
Once you've purchased affordable life insurance, if your financial situation enables you to purchase more coverage, you should consider disability insurance and long-term care insurance. Generally they aren't quite as affordable as the most accessible types of life insurance, but they're no less important.
Disability insurance becomes important to protect your income and provides a level of comfort when illness or injury occurs that prevents you from returning to work short-term or long-term. If your income supports you or your household, you need disability insurance.
Long-term care insurance, on the other hand, is for medical care as you age. You should consider purchasing long-term care insurance in your early 40s, while you're still healthy and in your prime earning years. As you get older you may need in-home care or assisted living, and this is not typically covered by Social Security and Medicare.
Even if you are unable to get insurance 10 times your salary, or if you are on a fixed income, you'll probably want to get as much insurance as you can afford. Talk to your financial planner and life insurance provider about your life insurance options. Some insurance providers offer online calculators or quick quotes, while others require that you speak with an agent to get quotes. Even if you can't get as much as you want, some insurance is better than none at all.
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