Life Insurance is one of those wealth strategy vehicles that no one really wants to talk about but is an important topic to review regularly. The reality is that there are many wealth management strategies where life insurance is an effective and vital tool. In business settings, Buy-Sell agreements and Key person insurance allow the business to invest capital in the likely higher return business and not expose the business to excessive risks of untimely changes in ownership or loss of a key individual in the business. If financial independence is not quite achieved life insurance is an effective and vital tool to protect the family until the “bell is rung” and it is no longer needed. Some important questions to consider include:
How much are you paying for term coverage? Term life insurance today is cheaper than it has been in about 20 years, as competition has driven premiums lower and lower.1 With hundreds of insurance firms offering term policies, it might be time to rewrite yours.
How cheap is term coverage right now? If you’re 40, it is possible to pay less than $1,000 a year – perhaps much less – for a term policy with typical death benefits of $250,000, $500,000 or $1 million. In fact, if you are a 50-year-old male living in California, $1 million of term coverage for 10 years can be had for as little as $780 annually, according to Insure.com’s November survey.
How can you get the lowest rates? It helps if you a) weigh 200 lbs. or less, b) have no family history of heart disease or personal history of tobacco use, c) have blood pressure in the vicinity of 140/80 and cholesterol below 240, d) drive safely with the record to prove it, and e) avoid dangerous travel and dangerous activities.
Why have premiums become so inexpensive? You can chalk it up to a few powerful factors: death rates have declined markedly in recent decades, and men are starting to close the life expectancy gap on women. Plus, insurers are going all-out to get your business – advertising online, on the radio, on TV and seemingly everywhere else.
Besides low premiums, what else should you look for? You want a guaranteed renewable policy, which will let you renew your term coverage at the end of the given term without having to undergo a medical exam. You also want fixed premiums for the life of the term, as opposed to a “teaser” premium that rises after a few years. You can buy a term policy lasting 10, 20, or 30 years; the shorter the term, the cheaper the premiums.
Cheap premiums shouldn’t be the only factor in selecting term coverage. There’s also the health of the company to consider. Insurance companies do go out of business – it is rare, but it happens. Did you know insurance companies are rated? You can check companies out at insure.com (the online ratings are totally free) and at ambest.com.
How can you save money? Make sure you talk with a qualified insurance advisor who can give you an overview as well as an update on the best rates out there. You may be pleasantly surprised what kind of term coverage you can get today for less.