This is the ultimate guide for saving on life insurance.
Here, you will find a massive list of 87 simple tips to maximize your insurance dollars, leaving you more money in your pocket.
So don’t buy life insurance until you read this. You could end up saving thousands of dollars over the life of the policy.
Definitions
Before we get to the list, here are a few terms you should be aware of.
Standard rate: This represents the average cost for someone of a particular age and smoking status. It’s the rate that most people pay.
Preferred rate: This is a discount that a small percentage of people qualify for based on their superior health and lifestyle.
Rated: This is a surcharge for people with medical and lifestyle concerns. The surcharge starts at 25% and goes up to 400%.
Health And Lifestyle Factors That Affect Life Insurance Rates
1. Quit smoking: Yeah, I know. Easier said than done. But this will save you the most money since smokers pay two to three times more for life insurance than non-smokers. Keep in mind that you have to be nicotine-free for at least 12 months to qualify for non-smoker rates.
2. Lose weight: While you can still qualify for standard rates even if you’re overweight, you can’t get preferred ratings.
3. Improve your health: Eat healthier foods, exercise more, sleep better. The better your health, the higher your chance to qualify for lower rates.
4. Drive safe: Besides health, lifestyle also plays an important factor in determining your life insurance rates. Speeding tickets, DUIs, and license suspensions will increase your premium.
5. Reduce dangerous hobbies: Do you like to live life on the edge? Insurance companies will charge you more if you engage in dangerous hobbies like motorized racing, parachuting, and more. Stopping or reducing your participation in these extreme sports will lower your rates.
6. Reduce your alcohol intake: Excessive consumption of alcohol also causes your rates to increase.
7. Say ‘no’ to drugs: While this isn’t a public service announcement, the message applies to buying life insurance as well. Most insurers shy away from this area so substance abuse usually leads to declines instead of ratings.
8. Buy simplified issue life insurance: If you have a health condition, you might be facing a rating of 100% or more with fully underwritten life insurance. In that case, it might be cheaper to get simplified issue life insurance. With this type of insurance, the life insurance application asks fewer questions and caps the death benefit you can buy. In exchange for simplicity, premiums are higher than a standard-rated traditional policy. However, it might be cheaper than a traditional policy rated 100% or more.
9. Have a health condition or live a risky lifestyle? Shop around: Different insurers treat medical conditions differently. One might rate you 50% while another might give you a standard rate. It pays to have a knowledgeable broker to do all the legwork for you since we can match you up with competitive insurers.
Ways To Save On Life Insurance Before You Buy
10. Buy the right type of insurance: Term or permanent? Whole life or universal life? Work with a life insurance advisor to find out what type of insurance you need. If you realize that you bought the wrong type, you waste time and money having to replace it later.
11. Don’t procrastinate: Every year you wait, your rates go up. Even more importantly, your health could decline, making it hard to qualify at standard rates. So lock in your rates while you’re young and healthy.
12. Work with a broker who can compare rates: There are dozens of insurance companies in Canada. You don’t know if you’re getting the best rates unless you use a broker who can compare rates for you. The difference in cost between the most and least expensive insurer is up to 30%!
13. Don’t use an insurance agent: The difference between a broker and an agent is that an agent is an employee of the insurance company. An agent can only sell the employer’s products. Therefore, an agent can’t shop the market for the best rate.
14. Don’t buy direct online: While e-commerce is growing at a tremendous rate, the way you buy life insurance hasn’t changed much. The best rates you can get are still through a broker. That’s because if you buy direct, you don’t go through underwriting. As a result, the insurance company doesn’t know much about you and has to charge more to protect itself from the unknown.
15. Don’t buy mortgage life insurance: Your lender would love to sell you mortgage insurance. But besides disadvantages like a reducing death benefit and not being able to choose a beneficiary, mortgage insurance is also more expensive than term insurance. Avoid mortgage life insurance like the plague.
16. Don’t buy other types of loan insurance: For example, line of credit and credit card insurance (also called balance protection insurance). Stay away from these products which are much more expensive than term insurance.
17. Don’t buy simplified or guaranteed issue life insurance if you’re healthy: These are also known as no medical life insurance because you can skip the medical exam when you buy them. These are more expensive than fully underwritten policies. If you don’t want to do the medical exam, lots of insurance companies let you buy up to $2,000,000 of coverage without a mandatory exam.
18. Bundle your insurance: Some companies offer other lines of insurance products like auto and home insurance. Bundling could make sense depending on how much you save.
19. Buy combination insurance: This is like bundling except all the insurance share the same pool of benefits. For example, if you make a critical illness claim, the amount leftover for a life claim is reduced. Manulife even has a product that combines life, disability, and critical illness insurance in one affordable package.
20. Buy more: Why do so many people shop at Costco? Because, buying in bulk saves you money. The same concept applies to life insurance. When you reach certain levels of coverage (eg $500,000, $1,000,000), you pay up to 20% less per $1,000 of coverage.
21. Buy less: I know, this is the exact opposite of the last point. But you don’t want to be worth more dead than you are alive. With this in mind, you should only buy as much as you need. Use a life insurance calculator to determine your needs.
22. Use a good life insurance calculator: Speaking of calculators, they’re not all built the same. One calculator might underestimate your needs while another could overestimate them. Obviously, if you use the one that overestimates your needs, you’ll end up buying too much and spending too much. Don’t know which calculator to use? We analyzed 15 online life insurance calculators to help you choose the right one.
23. Buy with your corporation: Take advantage of the lower corporate tax rate and buy life insurance with cheaper after-tax dollars inside your private corporation.
24. Use the capital dividend account: Another benefit of using a corporation is the capital dividend account. You can use this account to pay a tax-free dividend out of your corporation, saving you tax.
25. Discounts and promos: Insurance companies run promos all the time. Some give you savings like 10% off, while others give you free insurance for a few months. Ask your broker to see if any insurance companies can give you a bargain deal.
26. Buy more group life insurance: Getting optional insurance through your employer could be cheaper than buying your own insurance. But beware, rates usually go up every 5 years and become too expensive as you get older.
27. Member of a union or association? Buy insurance through them: Like group life insurance, these often have discounted rates but also go up every 5 years.
28. Backdate the policy to save age: Some insurers let you backdate the policy so that you’re considered a year younger. This could save you over 10% on your insurance premiums.
29. Buy in the first 6 months after your birthday: If it’s been more than 6 months since your last birthday, your age is rounded up to your next birthday. Buy in the first 6 months after your birthday to preserve your insurance age.
30. Get the guaranteed insurability rider: This life insurance rider lets you buy insurance at a later date based on your current health. By doing so, it locks in your insurability so even if your health declines, you can still buy insurance at standard rates.
31. Get the disability waiver of premium rider: This waives your premium if you become disabled, saving you money if you can’t work.
32. Get the children’s term rider: This gives you coverage at a low cost for your children. The best part? The cost stays the same no matter how many children you have.
33. Don’t buy the accidental death rider: This pays out an extra death benefit if you die from an accident. First, why do you need a higher death benefit if you die from an accident? Second, accidents make up a small amount of all deaths so you’re not likely to get a payout. Skip this rider and save your money.
Ways To Save During The Life Insurance Application
34. Use a cover letter: Ask your broker to write a cover letter for the underwriter. The letter serves to present you in the best light to get the best possible result.
35. Preferred rates: If your health and lifestyle are exceptional, you could qualify for preferred rates. This can save you up to 25% on your insurance premium.
36. Multi-life policy: Need to cover more than one person? Put all the coverages under a single policy and save by paying only one policy fee.
37. Pay annually instead of monthly: If your monthly premium was $90, you would pay $1,080 for the year. However, if you switched to annual payments, your premium will only be $1,000, saving you 8% in total costs.
38. Do the medical exam: Nowadays, you can buy up to $2,000,000 of coverage without doing the medical exam. But if your health is good, you still want to go through the process because it’s the only way to get preferred rates.
39. Improve your medical exam results: Schedule the exam first thing in the morning on an empty stomach. Don’t drink caffeine before the exam. Wear loose-fitting clothing during the exam. These are just a few actionable tips on how you can optimize your test results. Check out this post for a full list of little-known tips.
40. Disclose all health and lifestyle issues: While this might not lower your payments, it could save your loved ones a lot of money by preventing a denied claim due to misrepresentation or fraud.
41. Disclose details of your medical history: The more you can show that you’ve overcome an illness and taken steps to prevent reoccurrence, the better the result.
How To Save On Life Insurance After You Buy It
42. Grace period: Do you pay your premiums annually and are in a cash crunch? Take advantage of the 31-day grace period and pay after the due date. Don’t worry, you’re still covered during the grace period.
43. Lower your coverage as needs decrease: In general, your insurance needs decrease as you get older. Pull out the life insurance calculator to see if you still need as much coverage. If not, reduce it as necessary.
44. Remove riders: Got a rider that you don’t need anymore? Take it off and save the premium.
45. Remove rating after your health improves: For some policies with a rating, you can get it removed if your health improves. Keep in mind you’ll need to go through medical underwriting and disclose your medical information again.
46. Change to non-smoker rates: Rest assured, you’re not stuck with high premiums if you smoke. If you stop smoking for 12 months and test negative for cotinine in your urine, you can qualify for non-smoker rates.
47. Apply for preferred rates: Missed your chance at preferred rates when you first applied? You might be able to try again later if your health has improved.
48. Convert term to permanent insurance: If your health has deteriorated and you need permanent insurance, rather than buying a new policy, convert your term insurance. You can do this without providing evidence of insurability. The best part? You will save a lot compared to buying a new policy.
49. Cancel your insurance: Have all your debts paid off and don’t have dependents anymore? Cancel your insurance and save your premiums.
50. Replace your insurance: Got an expensive whole life policy that you don’t need? Replace it with a cheaper term policy.
How To Save On Term Life Insurance
51. Buy term instead of permanent insurance: For the same amount of coverage, term insurance is much more affordable than permanent. In fact, it can be up to 95% cheaper! It’s also the type of insurance that the vast majority of people shopping for insurance need.
52. Buy a shorter term: The shorter the term, the more affordable the policy. Some companies offer terms as short as 5 years which are perfect for covering short-term obligations.
53. Buy a longer term: If you plan to keep the insurance for 20 years, don’t buy a term-10 policy and renew it after 10 years. Instead, buy a term-20. You end up paying less over 20 years this way.
54. Buy a shorter term, then exchange it for a longer term: Can’t afford the longer term right off the bat? Start off with a shorter term to get covered and lock in your insurability. When your cash flow improves, you can exchange it for a longer term. For example, you can start with a term-10 policy and convert it to term-20 later.
55. Buy decreasing term insurance: The death benefit for these types of policies decreases over time, ideal for covering mortgages. Because of the decreasing coverage, these are a bit cheaper than level coverage policies.
56. Buy joint first-to-die term insurance: Instead of buying 2 separate term policies, you can get a cheaper joint policy that pays when the first person dies. This is also a good substitute for mortgage life insurance.
57. Ladder your term insurance: Laddering means stacking terms of different lengths on top of each other. For example, term-10, term-20, and term-30. After 10 years, you drop the term-10 policy. Then you drop the term-20 after 20 years, leaving you with the term-30. Laddering can save you more than 60% compared to buying a single term-30 policy.
58. Don’t renew term insurance: Did you know that the premium increases by three to ten times after the initial term? Instead of renewing it, you can buy a new term policy. Be careful if you’re going to do this because your health and lifestyle could deteriorate over the years, making a new policy more expensive. Also, don’t cancel your current policy until the new one is in force!
59. Check renewal rates: If you really must renew, check the renewal rates before you buy. For example, one company might have better rates in the first 10 years for a term-10 policy, but much higher rates in the next 10 years.
60. Buy Manulife Vitality: This is a unique term insurance product from Manulife that gives you discounts on your premiums for leading a healthy lifestyle.
How To Save On Permanent Life Insurance
61. Buy permanent instead of term insurance: Planning to keep your policy for life? The most cost-effective way to do this is with a permanent policy. Term insurance becomes too expensive to keep in force as you get older. Also, most expire at age 85, so it won’t last you a lifetime.
62. Buy universal life: If you want a no frills permanent life insurance policy without cash values, universal life is the way to go. It’s the most affordable type of permanent life insurance.
63. Buy yearly renewable term (YRT) universal life: This type of universal life insurance has the lowest premiums in the first few years. But beware, the price goes up exponentially as you get older.
64. Convert YRT to level cost of insurance: To prevent the rates from getting out of hand in the later stages of life, you can convert YRT universal life insurance to level cost of insurance. This locks in your rates at a level premium until age 100.
65. Save on taxes: A permanent policy can act as a tax-shelter for your investments, saving you lots of taxes, especially if you’re in a high tax bracket.
66. Use your policy as collateral for a loan: While there are several ways to access the cash value inside a permanent policy, the most tax-efficient is using the policy as collateral for a tax-free loan.
67. Buy permanent insurance inside your corporation: Investment returns from passive assets like stocks and mutual funds are taxed at a high rate inside your corporation. Shift these assets inside a permanent policy where they’re sheltered from taxation. This is a powerful way to save your corporation a lot in taxes every year.
68. Buy permanent insurance inside your corporation, reason #2: Passive income inside your corporation can reduce your small business deduction limit, leading to more taxes on your active business income. Shift your investments within your corporation to a permanent life insurance policy to save on taxes.
69. Stop paying premiums: If your permanent policy has enough cash value inside, you can use it to pay for premiums in case you’re in a cash crunch. You can always resume paying at any time.
70. Buy a small amount: If you only need permanent insurance to cover your funeral costs, a small death benefit of $10,000 to $25,000 should do the job.
71. Don’t buy participating whole life: Although this provides tax-sheltered growth and long-term cash values, it’s also the most expensive type of permanent insurance.
72. Choose a longer pay period: Lots of permanent policies let you pay the cost of insurance over a shorter period like 20 years. After 20 years, the insurance is paid-up and no more premiums are necessary. While this is an attractive choice, the premiums are higher than policies where you pay to age 100.
73. Buy joint last-to-die life insurance: Instead of buying 2 separate permanent policies, you can get a cheaper joint policy that pays when the second person dies.
How To Save On Disability Insurance
74. Choose a shorter benefit period: You won’t protect yourself in case of a very long-term disability. But since most disabilities only last a few years, you might be fine with a shorter benefit period.
75. Choose a longer waiting period: The waiting period is how long you have to be disabled before benefits start. Choosing a longer period like 120 or 180 days will lower your rates. During that time, you can claim short-term disability insurance or Employment Insurance (EI). Also, an emergency fund will help you bridge the gap between the onset of disability and benefits kicking in.
76. Choose a lower monthly benefit: Of course, you want to make sure the benefits are enough to cover your expenses.
77. Buy a guaranteed renewable policy: This is cheaper than a non-cancellable policy. However, premiums aren’t guaranteed so the insurance company can increase the your premiums upon renewal.
78. Buy a policy with more exclusions: Some policies have exclusions for substance abuse, intentional self-inflicted harm, and more. These are less costly than policies with fewer exclusions.
79. Buy an injury-only policy: Be careful with this one since injuries only make up a small percentage of disabilities. If you do become disabled, chances are it will be from an illness and you won’t get any payout.
80. Buy a policy with more conditions: Some lower-cost policies offer shorter benefit periods for disabilities resulting from soft tissue injuries and mental disorders.
81. Don’t buy riders: If you only need the basic long-term disability coverage, opt out of costly riders like return of premium.
82. Upgrade your occupation class: The rate you pay for disability insurance depends largely on your occupation. But did you know you can upgrade your occupation class? You’ll need to show a certain level of income and experience to qualify for the upgrade and take advantage of lower rates.
83. Buy business overhead insurance: Run your own business? Get your business expenses paid for if you become disabled with a business overhead expense insurance policy. The best part? Unlike other types of insurance, the premiums are tax-deductible.
84. Get a discount: Some insurance companies offer discounts for certain occupations. You might also get a discount if you meet income and experience requirements. Lastly, some insurers give discounts for individual disability policies if you already have group disability insurance.
How To Save On Critical Illness Insurance
85. Buy a smaller amount: Critical illness insurance is more expensive than life insurance, and you don’t need as much, so go for a smaller benefit here.
86. Buy a basic policy: Instead of covering 25 illnesses like standard policies, a basic one only covers three or four of the most common ones (heart attack, cancer, and stroke).
87. Don’t buy the return of premium rider: This rider gives you back your premiums paid over the years if you never make a claim. It sounds like a good deal, but prepare to pay a lot more for this benefit.
How Will You Save On Life Insurance?
Life insurance is an important part of your financial plan, but it doesn’t have to break the bank.
Although most people overestimate the cost of life insurance, it’s actually quite affordable.
And if you implement the tips in this post, you can lower your cost even more.
Which saving tips can you implement?
Get Your Life Insurance Quote Now
While we make every effort to keep our site updated, please be aware that timely information on this page, such as quote estimates, or pertinent details about companies, may only be accurate as of its last edit day. Brian So Insurance and its representatives do not give legal or tax advice. Please consult your own legal or tax adviser. This post is a brief summary for indicative purposes only. It does not include all terms, conditions, limitations, exclusions, and other provisions of the policies described, some of which may be material to the policy selection. Please refer to the actual policy documents for complete details which can be provided upon request. In case of any discrepancy, the language in the actual policy documents will prevail. A.M. Best financial strength ratings displayed are not a warranty of a company’s financial strength and ability to meet its obligations to policyholders.
2 Comments
I agree that you should consider paying life insurance premiums on a yearly basis. I think it’s a good way to reduce the amount of monthly bills you have. I’m sure you can also save quite a bit of money in doing so.
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