If you're putting off buying life insurance because you think it'll cost too much, it's time for a reality check. Young adults, who are most likely to qualify for the best insurance rates, overestimate the cost by almost seven times. Basic life insurance is surprisingly affordable, even if you're supporting a family on a shoestring budget.
Buy as much term life as you can afford now
The average cost of basic term life has dropped by about 50 percent in the last decade due to longer life expectancy and greater cost efficiency in product design and administration. A Typical term life insurance covers you for a certain period -- such as 10, 20 or 30 years -- and pays a death benefit if you die while the policy is in force. The younger and healthier you are when you buy, the lower your quotes will be. Life insurance rates go up as you age and as you develop health conditions, such as high blood pressure.
Consider annual renewal term life
annual renewable term life guarantees your insurability for a set period of time. However the premium increases each year during the term, based on your age. With level-premium term life, the premium stays the same for the entire term. In the early years of the policy, premiums for annual renewable term life are less expensive than those for a comparable level-term life policy. Annual renewable term is ideal for people on tight budgets whose incomes will increase over the years.
Comparison
Life insurance rates vary by company. Get term life quotes from different carriers to find the best deal. Generally, the more you buy the less the cost is per $1,000 of coverage.
Don't go by price alone
Check the financial ratings for the life insurance company selling the product before you buy, and shop for quality. Steer clear of ultra-cheap term life products that lack important options, such as waiver of premium riders, which pay the premium if you become disabled and can't work.
Another important feature that might not be available on the cheapest products is the ability to convert the term policy to permanent life insurance, such as whole life or universal life. Permanent life insurance, which normally is more expensive than term life, covers you for your entire life and includes cash value, which grows tax-deferred. The ability to convert is important for two reasons. One, the conversion feature lets you turn the term life policy into permanent coverage, even if you develop a health condition and would otherwise be uninsurable. Two, conversion lets you build a permanent investment as your income grows.
Maximize group life insurance
Many employers offer basic group life insurance as a benefit. Usually, the amount of coverage isn't enough for most families. Check on how much is provided and whether you can supplement it with additional group life coverage at your own expense. Premiums for voluntary coverage through a group plan can be 10 percent to 20 percent less than individual life insurance because of enrollment and billing efficiencies.
Think about your family
If you're tempted to delay purchasing life insurance because money is tight, just think how financially stressed your family would be without you and your income.
Research shows a big reason people don't buy life insurance is they have other financial priorities, such as paying the mortgage or saving for their children's education. But those priorities are exactly the reason to buy it.
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