By Edmund Lao, RFP®
Life insurance is a form of income protection for the family. This is also a vehicle to transfer the uncertain risk in life from an individual to an insurance company. This in turn becomes a vehicle used to transfer wealth to the bereaved family in case the inevitable happens. To summarize, insurance is a financial tool that serves as a shield against financial loss resulting from the demise of the breadwinner.
In this type of insurance, maximum protection is a must. The premium has a direct bearing on the benefit of the family. For sure, nobody would want to receive a minimal benefit when the time comes. Let us see how we can save on premiums for life insurance
- The price of life insurance premiums varies hugely between providers. Check from reliable source the company and the premium. Of course never sacrifice the benefits for the lowest premium. Always remember that the cheapest is not always the best. Always keep in mind the value for money. You always get what you paid for.
- If you’re not sure which the best type of policy is for you, it’s best to take independent advice. Go for financial planners who are not connected with any insurance company. They can give you unbiased advice which can save you lots of money. Remember that taking the wrong product which does not match your goals is a waste of money.
Check your existing cover
- It’s worth checking if you already have existing life cover elsewhere. For example, your employer may offer life cover as standard, as your employer may have a pension scheme. Also, some banks also offer free insurance that is four times the amount saved as coverage. It pays to check so you know if you are under- or over-insured.
Buy term insurance
- Term insurance is relatively affordable especially if budget is an issue. However term insurance increases in premium with age. However, there are some products that offer free term insurance as rider. Pre-need products offer such package. However, as the maturity arrives, the insurance terminates. Just make sure that by the time you have no coverage anymore, your investments will make you self-insured. Also buying term insurance allows you to have extra funds to invest your money for growth.
Take advantage of time
- Buy your insurance while young and while healthy. Insurance premiums tend to increase with age and health. The poorer the health condition, the higher the risk the insurance company will take, hence the increase in premiums.
Ask for discounts
- Although insurance companies do not give discounts on life insurance (premium is computed by the actuarial experts), you can try to ask your agent to give you a discount from his commission. Although there are those who practice it, it is quite unethical to slash down the income of the agent for doing his job of helping you. It might be good for the client but not for the agent.
Give up smoking
- Life insurance premiums are significantly higher if you smoke as you’re more likely to die early. While giving up probably won’t result in cheaper premiums immediately, many insurers may offer you cheaper cover once you’ve been tobacco-free for a year.
Write your policy in trust
- Writing your life insurance policy in trust will not save you money right now, but it’s always worth doing and could save your family a huge amount in estate tax. If you write the policy in trust, when you die the insurance payout sits outside your estate, so isn’t usually liable to estate tax. If you don’t put the policy into trust, your estate will be taxed on the excess. Try to get advice from estate planners and learn the ins and outs. You may also but the book “Thy Will Be Done” authored by Atty. Angelo Cabrera.
Make sure you actually need life insurance
- Do you really need life insurance? If you’ve got young children or other dependent relatives, it makes sense to have life insurance because you’re a breadwinner. But if you’re single with no family to support, or your mortgage is already paid off, you may find you don’t really need life insurance.
Be your own agent
- I am saving the best for the last. To save a lot from premiums, be your own agent. You will earn commission from your own policy, thus saving you 50% on the first year. For the succeeding years, you save maybe around 10%. But be sure to study well the financial products so that the product you buy suits your goal. Aside from this perk, you eliminate the constant calls and follow ups of the agents selling the same. At the same time, you have the chance to have your policy becoming free by being an agent not only to yourself but to others. Just be sure that you educate your clients before making a sale. When this happens, you can say that your policies are free since they were paid by your clients.