10 Ways To Save Money On Life Insurance

Read the Spanish version: 10 maneras de ahorrar dinero en tu seguro de vida

Just as there are different life insurance plans to meet your needs, there are different ways to save money on life insurance.

Most importantly, shop around for life insurance quotes. There are hundreds of insurance companies offering a wide variety of plans and prices. Comparison shopping can save you big bucks. In addition, here are 10 more ways you can save money on your next life insurance purchase.

1. Consider term life insurance

Some financial planners advocate permanent life insurance policies with cash value components because the policies force you to save money. Others recommend you buy term life insurance for the cheaper premium and invest the difference.

But cash value in life insurance should not be considered a traditional investment. Any withdrawals or loans not repaid will reduce your death benefit. Also, if you take a partial withdrawal from the cash value of your policy in an amount greater than your total premiums, the withdrawal in excess of your total premiums is considered taxable income.

Furthermore, the difference in premiums between term vs. permanent life insurance is not just a matter of a few dollars per year. According to the Society of Actuaries, premiums for whole life can be five to 10 times higher than the same amount of level term life, depending on the kind of level term being compared. For example, if you're comparing the premiums of 30-year level term it will be a smaller multiple, while premiums on a 10-year term policy could be a larger multiple.

Every time you renew term life insurance, your premiums will increase. Renewing a short term life insurance policy over and over isn't a wise use of money. Instead, buy a long term life insurance policy, or buy whole life insurance if you definitely want to leave money to your heirs.

People with a short-term need generally include those who want life insurance to cover a specific debt - like paying off a mortgage.

2. Seek out low-load life insurance policies

"No-load" or "low-load" life insurance policies have fewer expenses built into them, such as agent commissions and fees, than other life insurance policies. This can mean low cost life insurance. For variable life insurance, these lower expenses mean a higher percentage of your premium goes to work for you right away, allowing you to build your cash value faster.