How To Save

While many people understand the importance of life insurance, it often can become an after thought as many people's budgets get squeezed. Find out tips that can help you save when purchasing your life insurance policy.

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Life Insurance Buying Strategies

The competition is stiff for your life insurance business. Life insurance agents are paid almost entirely from commissions when they sell you a policy.

Why is this important? Life insurance agents get the largest commissions for selling whole life policies. As much as 80% of your first year’s premium can go towards the agent’s commission. In comparison, an agent that sells a term insurance policy typically receives only about 10%. This knowledge will prepare you for the agent’s recommendation of whole life policies. This is not a warning against whole life policies, but the fact is that the vast majority of those who need life insurance should consider term life insurance.

These days, finding affordable rates on 20 and 30 year term policies is fairly easy. The annual premium on a $500,000 term policy for a healthy, nonsmoking 40-year-old male might be about $500. This means you can get extended coverage while easily staying within your budget.

The argument from agents advocating whole life policies is that this type of permanent insurance lasts through your lifetime and builds up cash value tax-free, which you can then borrow against. But there are significant fees and commissions that are built into whole-life policies. There are also “surrender charges” should you decide to cancel your policy. Add up the fees and penalties and it may not be such a good deal. The comparison of whole life vs term life is no contest when you consider that the "face value" death benefit from a term life policy is tax-free to your beneficiaries and you have more flexibility with this type of life insurance.

If your goal is to get life insurance coverage for an extended period of time at the lowest premiums on the market then term life is the way to go.

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