Life insurance can be expensive, and I even once had a friend with wealthy parents tell me that she and her husband didn’t have life insurance because if something happened to them, her parents would take care of their kids. I’ve always wondered if her husband would really be okay with being financially dependent on her parents if something happened to her and he was left to raise their kids alone. It’s not the path my husband and I want to take, so we’ve agreed that life insurance is worth paying for, even if does take a real chunk of money each year.
There are two components to paying for a life insurance policy – the first is minimizing the cost, and the second is finding the money to pay for it. Here are some tips:
Minimizing the Cost of Life Insurance
1. Buy term. Term life insurance is much more affordable than a whole life policy (and I explain the difference here). Be sure to select a term that’s long or short enough to suit your needs. For example, if your child will be graduating from college in ten years, you don’t need a 20-year policy intended to help pay for college.
2. Buy a group policy through your employer or union. Your employer or union may provide you with a policy, or offer a group policy at a discount. If this policy is only inexpensive up to a certain amount, you can combine it with other life insurance policies.
3. Compare policies and rates. Different insurers charge different rates, so it’s worth shopping around. There are lots of comparison sites out there, and they tend to be affiliates in it for the referral link payout, so do be careful when using a web site.
4. Take care of your health. The healthier you are, the more likely you’ll outlive your term policy, so the lower your rate will be.
5. Don’t buy more coverage than you need. It can be tricky figuring out how much life insurance you need, but overpaying is like throwing money away, since hopefully you’ll outlive your policy.
Paying for Life Insurance
1. Pay your premium annually. Most insurers charge a convenience fee for allowing you to break your premium up into multiple payments. If you can afford to do so, pay your premium all at once to avoid paying extra fees.
2. Use an Infrequent Bills Account to save up the annual premium. Back in 2007, I created an Infrequent Bills Account to hold money for annual and semi-annual bills. I deposit money for those bills into the account each month, and take money out when the bills are due. It makes paying those bills a lot easier when the money for them is already set aside.
3. Use the Snowflake Method. Take all the little bits of savings here and there that you can find and save them up to pay for that life insurance premium. Or add up your coupon savings and set them aside. If you’ve decided you need a life insurance policy, the important thing is not to wait – you never know what’s going to happen or when.