Saving Money on Life Insurance
Rates are Lower
If you haven’t priced life insurance lately, you probably want to take a fresh look. Mortality experience has improved and rates have fallen.
Replacing Lost Earnings.
The most common need for life insurance is to replace lost earnings that would have supported your family. If you plan to retire (and who doesn’t?), your need for life insurance will reduce over time – the closer you get to retirement. While there are purposes for other kinds of life insurance, consider term products to meet temporary needs.
In calculating your life insurance needs, don’t overlook dependent support during retirement and retirement income you may lose upon death. Social Security benefits are adjusted at the death of a spouse. While this may increase the individual amount the survivor receives, it will be less than the total both were receiving.
Term Life Insurance
Term Life Insurance provides life insurance for a period of time (the term of the policy) – the longer the term, the higher the initial rate. The cheapest coverage now is always annual renewable term (ART), which has higher rates at each renewal. If you need coverage for 10 or 20 years, it may be advantageous to purchase a longer term, such as ten year renewable term life insurance, which has level premiums for ten years, then adjusts upward for the next ten years. You can also consider starting coverage over again at the end of a term by buying replacement policies at lower cost by going through underwriting again.
Level Premium, Decreasing Term
If you truly have a decreasing need for life insurance, you may be interested in annual renewable term life insurance and gradually reducing the death benefit over time. Since the rates increase over time, you are buying less and less of the more expensive coverage. This can level your premiums while providing the coverage you need at the most cost effective rates. If you like the concept, but don’t want the hassle of managing the policy amendments, you might prefer a Level Premium Decreasing Term policy tailored to your needs. Most of these are sold to protect a loan with decreasing payoff, but they can also work to cover your decreasing need for life insurance – if you can forecast it up front.
You hit the nail on the head. Even the cost of permanent life insurance has been reduced significantly.