How to Save Money on Life Insurance

Quick Answer

The average cost of life insurance is $360 per year, but there are actions you can take to possibly lower the cost, including:

  1. Buying insurance when you’re young
  2. Buying only the coverage you need
  3. Buying term life insurance
  4. Looking for policy discounts
  5. Maintaining good health
  6. Shopping around and compare
senior couple meeting with their life insurance agent at a table outside

Life insurance helps your loved ones to replace your income and pay for burial costs and any remaining debt after you pass. While life insurance is probably more affordable than you might think, it does come at a cost. The average cost of life insurance is about $30 a month, or $360 per year, according to Policygenius.

Fortunately, there are various ways to bring down the cost of life insurance so you can get the coverage you need. Here are six effective methods to help you pay less for life insurance.

1. Buy Insurance When You're Young

Life insurance becomes more expensive as you age and become more susceptible to health issues that could reduce your life expectancy. One option to save money is to buy life insurance when you are younger to lock in an affordable premium. That way, you'll pay the same insurance premium for the policy's term, which can last up to 30 years, or for your whole life with permanent insurance.

For example, further data from Policygenius reveals how much a 30-year, $500,000 term life insurance policy would cost for a female at different ages:

  • Age 20: $30.80 per month
  • Age 30: $38.96 per month
  • Age 40: $79.87 per month
  • Age 50: $211.44 per month

Clearly, you can pay less by purchasing a policy (and locking in your premiums) in your twenties and thirties, as base premiums climb significantly as you get older.

2. Buy Only the Coverage You Need

Determining how much life insurance you need means choosing a death benefit amount that allows your beneficiaries to meet their financial obligations when you die.

Many financial experts advise choosing a death benefit that equals 20 or 30 times your annual salary. The amount you need, however, may depend on your unique situation. You may not need millions of dollars of coverage if you don't have a family or own a home, for instance; but you may want to add more coverage if you have three kids whose weddings or college costs you want to cover. Remember, the amount of coverage you need will change over time, and you can usually adjust it as needed if you determine you need more or less.

3. Buy Term Life Insurance

Another option to pay less for life insurance is to choose a term life insurance policy rather than a permanent one, such as whole life insurance.

Permanent insurance lasts your whole life and includes a savings portion known as cash value. This account can earn interest and grows tax free over time as you make regular payments. Of course, these benefits come with higher premiums—up to 15 times more expensive than term life insurance.

By contrast, a term life insurance policy doesn't offer an investment component. Term life is basic insurance that covers you for a specific period, such as 20 or 30 years. Choose a term length long enough to cover your highest income-earning years. Your term should also cover the years when you need the most protection, such as when your children are growing up or you're still paying off your mortgage.

Ask your agent about a renewable guarantee that entitles you to begin a new term when your current policy ends. Doing so can help you stay insured when you are older without paying into permanent life insurance.

4. Look for Policy Discounts

Ask your insurance agent about any discounts you may qualify for, such as bundling your life insurance with your home or car insurance. Additionally, many companies provide discounts for belonging to a specific group or organization, such as the military, seniors and teachers.

If you can pay your annual life insurance premium upfront, you can save money on your life insurance. Many life insurance companies offer deep discounts for paying your premium in full once a year. These discounts can range from 2% to 8% of your annual premium amount, a not-insignificant amount of money over 20 or 30 years. If you plan to make annual payments, it may be worth shopping around and comparing different life insurers, as discounts can vary widely between carriers.

Another little-known money-saver is to take advantage of rate discounts many insurance companies offer for choosing a specific coverage amount. For example, you may score a lower insurance premium for $500,000 worth of coverage than for $450,000 because of a rate discount on the higher coverage amount.

5. Maintain Good Health

Maintaining good nutrition, exercise and sleep habits, as well as limiting your emotional stress, can help you stay healthy and avoid health issues that influence your premium costs. Additionally, not smoking, limiting drinks with alcohol and maintaining a healthy weight can also keep your premiums low.

Smokers die about 10 years sooner than non-smokers, and tobacco use is the top preventable cause of death, according to the American Cancer Society. You can enjoy significant premium savings over time by not smoking. And, if you already have life insurance and you've been tobacco-free for at least a year, request a requalification from your insurer to receive nonsmoker rates and potentially save money.

6. Shop Around and Compare

It's always wise to shop multiple insurance companies and compare quotes to ensure you find the best policy for your needs. Getting quotes from several insurers can help you find lower premiums, but that shouldn't be your only consideration. Your best option is to find the best balance of price and coverage, ensuring you get sufficient coverage at a price you can afford.

You can contact several insurance companies or work with an insurance broker with access to several carriers. Online quote services can also be a helpful resource for comparing various quotes.

The Bottom Line

Purchasing enough coverage is essential to protect your dependents from the loss of income and other financial consequences if you pass away. You can, however, employ one or more of the above strategies to pay less for life insurance coverage.

Remember, many states permit life insurance companies to consider a credit-based insurance score when determining your premium amount. If your state allows this practice, consider improving your credit before purchasing life insurance. Start by checking your credit report and credit score for free with Experian and addressing any issues you find on your report.