Paying Too Much For Your Life Insurance?

I wrote this nearly 4 years ago and on review there are a number of points that need updated, so here you go.

Do You Really Have The Best Price On Your Life Insurance?

There are a number of ways you can end up paying too much for your life insurance like 1. Not all life insurance companies charge the same, 2. Some life insurance companies treat a specific risk as more expensive than another company, 3. You don’t have an agent that helps you keep track of ways to lower your cost, 4 You bought the wrong life insurance product for your need, 5. You no longer need the original amount of life insurance you purchased or 6. You just didn’t know you could get it for less. I just want to go over these 6 ways to reduce the cost and if any of them ring true for you then maybe it’s time to take a look at how to reduce your life insurance bill.

Did You Know?

• Not all life insurance companies charge the same. Here is an example of five companies and what they charge for their best rate class. The best rate class assumes good health, family history and no dangerous activities. These quotes are for a 60 year female wanting $250,000 of 20 year term life insurance.

1. Principal National Life Insurance $881.48 per year
2. Mass Mutual Life Insurance $990.00 per year
3. Northwestern Mutual Life Insurance $1090.00 per year
4. Guardian Life Insurance $1182.50 a year
5. Ameritas Life insurance $1222.50 a year

• Life insurance companies may treat a specific risk factor much differently making the wrong choice of company an expensive mistake. Let’s take something simple like family history. Specifically let’s talk about a parent dying of a heart attack at age 59, but living through the event. Most companies treat that death as opposed to one over age 60 much differently. Some use age 65 as the threshold. These quotes are for a 50 year old male wanting $500,000 of 30 year term.

1. Minnesota Life Insurance $1662.50 a year
2. United of Omaha Life Insurance $2327.50 a year
3. Banner Life Insurance $2505.50 a year
4. Transamerica Life Insurance $2995.00 a year
5. North American Life Insurance $3000.00 a year

• Not having an agent that helps you keep track of ways to lower your cost. A good example is someone who is taking flying lessons. Let’s use a female age 40 wanting $250,000 of 30 year term. While they are a student pilot and until they reach a threshold of 100 hours of pilot in command a few life insurance companies will standard rates (Cincinnati Life $43.56 a month) while most will charge a flat extra charge of $2.00 (Minnesota Life $73.28 a month to $3.50 per thousand (Penn Mutual $97.83 a month). What I see fairly frequently is student pilots that never really stick with their quest to become a pilot. It ends up taking too much time or too much money to pursue that dream, so they bag that dream and take up fly fishing. Or there is the case of a pilot who reaches the threshold of more than 100 hours of pilot in command and forgets there was an opportunity for major savings at that juncture (North American $34.10 a month).  Often people with life insurance get used to the price and forget why they’re paying what they’re paying. They need an agent that stays in touch to remind them that there are savings to be had.
• A little further along in owning your life insurance policy is where a lot of chances to save money are missed. Life insurance applications are approved based on a snap shot in time. The snap shot could catch a lab result like your cholesterol/HDL ratio being 5.2 instead of the 5.0 it takes to get the best rate. That could cost 30% more than you need to pay, and while that is reality at the time you apply, it may not stay the same. A proactive agent will let you know how that cholesterol reading affected your approval. When that agent calls on the first anniversary of the policy they should recommend a new set of labs to see where your ratio is. If it is back to 5 or under you can apply and get approved for the best rate class and put that 30% in back in your pocket. Probably the most important thing you can do to set up a future decrease in the rates you’re paying is to find out exactly what caused the initial increase and what threshold needs to be met to get a better rate. It simply isn’t true that once approved, that’s as good as it gets.

Bottom Line

Your false comfort with paying too much is why a life insurance agent should be servicing your business on at least an annual basis. They know why you are paying that price and they know the events that need to happen to change it. Good customer service by your life insurance agent, while abused by some agents as a way to sell you more, could and should be a way for them to make sure you always have the most affordable option in your policy. If you have questions or believe you may need a second opinion or some help figuring out why you’re paying too much for life insurance, call or email me directly. My name is Ed Hinerman. Let’s talk.