There’s a reason some consumers hesitate to buy life insurance — they’re worried about the cost. For some reason, life insurance has a reputation for being expensive, even though it’s more than possible to put an affordable policy in place.
In fact, the average consumer spends only $82 a month on life insurance, according to a new doxoINSIGHTS report. That’s certainly not a negligible amount, but it’s also one you may be able to incorporate into your budget pretty easily, especially if you’re willing to make some changes to other spending categories (think non-essentials like cable and restaurant meals).
That said, there are also a few steps you can take to spend less on life insurance. Here are some to consider.
1. Don’t wait too long to apply
The younger you are when you apply for life insurance, the more likely you’ll be to snag affordable premiums based on your good health. As you age, your health could worsen, leaving you on the hook for premiums that cost a lot more.
2. Choose term life insurance over whole life
Term life insurance only covers you for a specific period of time, or term, and it does not accumulate any sort of cash value. This means if you get a 30-year term policy, pay those premiums for 30 years, and don’t pass away during that time, your insurance policy won’t pay out a dime.
That may seem like a bad deal at first, especially compared to whole life insurance, which offers the benefit of permanent coverage and a cash value you can benefit from. But it’s actually not for one big reason: You’ll pay a batch less for term life coverage than whole life.
In fact, many people who sign up for whole life insurance wind up letting their policies lapse because they can’t afford the premiums. Or, to put it another way, they pay those premiums for a few years and get nothing in return, because they let their policies lapse before the cash value at hand amounts to anything.
3. Don’t buy too much coverage
If you’re looking for a life insurance policy that will pay out a $2 million death benefit, it’s apt to cost you more than a policy that will pay out $800,000. But if you don’t need $2 million in coverage, you can simply opt not to pay for it — it’s that simple.
Many people are tempted to load up on life insurance, but that can drive their premiums to the point of being unaffordable. A better bet is to figure out what specific coverage you need rather than pay extra for coverage you don’t.
One good rule of thumb is to secure enough coverage to cover 10 times your salary. If you earn $80,000 a year, for example, an $800,000 policy should do the trick.
While life insurance certainly doesn’t cost nothing, it may be more affordable than you think. It pays to shop around for quotes from different insurers so you can see what sort of price tag you’re looking at for the coverage you need. You may be pleasantly surprised at the numbers you get.
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