Life insurance is essential if you have debts, a mortgage or lots of dependents. However, the older you are, the more expensive it becomes. If you add medical issues and other health concerns to the mix then you might be refused altogether or quoted astronomical premiums that make you question whether itâs worth the protection.
Fortunately, there are a few things you can do, ways you can improve your chances of securing favorable terms and getting cheap protection for your family.
Choose a Term Policy
Life insurance comes in many shapes and sizes, but all policies are variants of a whole life policy and a term life policy. The former lasts for the policyholderâs âwhole lifeâ, but can also be cashed out sooner; the latter is limited to a fixed term of between 10 and 30 years.
To the insurance company, itâs all about balancing expected profit and loss. With a whole life insurance policy, the risks are higher because they will pay out regardless of how long the policyholder lives and can only profit if the payments lapse or the policy is cashed. With a term life policy, the odds are always weighted in their favor because the policies are set to a fixed-term that the policyholder is likely to survive.
For instance, if youâre a healthy 20-year-old, you shouldnât have an issue getting a full 30-year term because thereâs a greater than 1 in 20 chance you will survive it. If youâre 60, your term may be limited to 10 or 20 years, because anything above that begins to tip the balance back the other way.
By opting for a term life insurance, you can place probability in the underwriterâs favor, thus ensuring you are offered the best rates. The shorter the term, the better those rates will be.
Height and weight are two major factors in determining the likelihood of a policyholder making it to the end of their term. The simple calculations will tell them whether you fall into an âoverweightâ or âobeseâ category, in which case your risk increases significantly.
If youâre in these categories, try to lose weight before you apply. Life insurance companies consider obesity to be as much of a risk factor as smoking and every pound you lose will reduce that risk and thus decrease your premiums.
If you have a lot of muscle and an average amount of fat, you may also face some issues as your weight wonât tell the whole story. This is one of the few times when a medical exam is preferred, as that way you can prove you are not overweight and should be considered a low-risk as opposed to a high one.
Itâs a no-brainerâsmoking massively increases your mortality risk and smokers live ten years less on average. The life expectancy in the United States is just under 80 years. To an insurance company, a smoker is uninsurable beyond that 70th year, making a thirty-year term highly unlikely for anyone aged 40 or more.
Smoking also increases your risk of heart disease, cancer, and a host of other conditions. Itâs a huge red flag and one that will increase your life insurance premiums, decrease your payout, and reduce your chances of being accepted altogether.
Saying no to the cancer-sticks will save you a small fortune on your insurance premiums and will also reduce your monthly bills, with the average smoker spending just under $2,300 every month.
Itâs not just smoking that life insurance companies focus on. Theyâll also penalize you if you chew, sniff or vape tobacco.
Be Careful How You Select Your Hobbies
Underwriters pay very careful attention to what you do in your downtime. If you spend your days shopping, chatting with friends and playing basketball, theyâre not going to bat an eyelid. But if your days are spent playing extreme sports, bungee jumping and skydiving, you will be considered high risk.
Some activities are riskier than others and, in some cases, they can make you as much of a liability as obesity and smoking. Itâs worth reconsidering your more extreme hobbies if youâre struggling to find cheap life insurance. All the following will make life insurance companies think twice:
Think Twice about Bankruptcy
Bankruptcy can increase your premiums because it is a known contributor to stress, which in turn can increase your risk of heart disease and many other chronic conditions. Whatâs more, someone who files for bankruptcy is also more likely to commit suicide.
Bankruptcy is never something you should rush into as it can leave a derogatory mark on your credit report that remains for up to 10 years. However, this aspect is rarely considered, even though it could seriously inflate your premiums.
Honesty isnât going to reduce your premiums, far from it, but it will make life much easier for your family if anything happens to you. If you lie on your insurance policy and you die during the contestability period, which begins as soon as the policy is active and ends after a year or two, the claim will be refused.
This can happen even if the contestability period is over, as long as the life insurance company can prove that you filed a fraudulent application. Life insurance is something you purchase to protect your family against the unexpected. Itâs not something you can predict with any degree of certainty, so lying and hoping that you will swerve the contestability period and avoid any issues is reckless at best and criminal at worst.
Stay honest, keep it simple, and try the other tips in this article to reduce your premiums legitimately.
Summary: Quote and Compare
Some of the things that you might expect to have a big impact on your life insurance premiums actually count for very little. For instance, riding a motorbike will not impact your eligibility unless you ride professionally. By the same token, it doesnât matter much if you spend a lot of time in the car, providing youâre not racing at high speeds every weekend.
The things you need to focus on the most to get a cheaper life insurance policy are your weight and smoking status. These are the things you can control, the things you can fix with time and perseverance. If you want to see just how much if a difference they can make, get a life insurance quote before you lose weight and/or quit smoking and then get a quote from the same company afterward.
You will be in a much more favorable position and should be offered lower premiums, even though you have aged an additional year or two since you last applied.
How to Get Cheaper Life Insurance Policies is a post from Pocket Your Dollars.