Nowadays, it is hard to find a cheap life insurance because there are so many choices out there and sometimes (not all), insurance agents tend to hard sell expensive insurances even though it is not practical for their client. Again, I am not saying that this is the case always but it saddens me whenever I encounter these types of agents who are pushy about expensive insurance products just to reach their target quota.
With this in mind, we need to somehow familiarize ourselves to the life insurance world so that our decisions are not easily persuaded and we can eventually shop for the best price and avail of the features that suits our specific needs. Thus, we will have an idea of the life insurance we need even before approaching any insurance agent.
The scary thing is that if we do not know anything and then we sit down with insurance agents, sometimes, we are influenced and they make us believe that their products are the best, bang for the buck life insurance for us. Sadly, after hearing stories of people who just bought one and explaining to them the features of the insurance they bought, suddenly, they are shocked and they do not know why they bought such insurance in the first place. Worse, some would want to cancel and shift to cheaper and suitable life insurance for them as soon as possible but it is now costly.
Further, finding a cheap life insurance is just like shopping for the best deal in a market. It is just finding the cheapest insurance that specifically covers your basic life insurance needs. For you to do this, you must have some ideas and tips that might help you to get the best deal!
Here are the 9 tips I can share to you in this article.
1. Do you really need a life insurance?
Ask yourself first if you really need one. The basic premise is that you have dependents that rely in your income and will be affected when you are gone. Second, you may also want to use insurance as an estate planning tool since it is exempted from estate tax if the beneficiaries indicated in the policy are irrevocable.
2. How much do you need?
Simple computation for this that you can compute now is by multiplying your monthly income (ex. P10,000) by 12 months to get your annual income (P10,000 x 12 = P120,000). Then you just multiply your annual income to 10 (P120,000 x 10 = P1,200,000). This is also your income replacement or retirement fund figure.
Why? Let me explain, in the above example, in an average return of 10% annually and having a fund of P1.2million, this will translate in an annual return of P120,000 (P1.2m x 10%) or P10,000 monthly. Thus, it can replace your active income and you will receive the same amount of cash inflow if you wish to retire or you are forced to retire. You now live on passive income thru your investments. Sounds great?
3. As Much as Possible, Get a Term Insurance Policy
Why? Historically, it is way cheaper and gives you flexibility. Yes, some of you already bought VUL type of insurances or those that are bundled with an investment because this is the product being pushed by insurance agents. As a Registered Financial Planner, I tell to my clients that if you do not have the discipline and you are too lazy to invest separately, you can have the VUL type of insurance/investment since you are requirement to pay your premiums which a part of these payments goes to your chosen bundled investment. Shooting two birds in one stone. In my case, I have a P2 million term insurance coverage at P6,000 per year only and I invest separately in mutual fund and stocks for my other financial goals.
4. Get Quotations From Different Insurance Companies
You can do this in few minutes only. You can call some insurance agents, tell them your personal information and get quotations or you can ask them to send their proposals thru email. This may entail some effort but this will definitely save serious amount of peso which could have been invested in stocks or mutual funds. Most of the insurance agents nowadays have tools or software that generates quick client policy proposal.
5. Avoid Additional Insurance or Add-ons
Stick to your purpose, basic life insurance is all you need? Unless, of course, if you want other policy riders or add-ons or even additional insurance coverage. Same thing as buying a car, agents will offer you add-ons like step-on boards, leather seats, tints etc. In insurance, they tend to offer you riders or add-ons as if you need all of them. Again, the more sales, the more commissions, so beware. On the other hand, I advise you consider getting a critical illness benefit feature so that in case that you are diagnosed wish such illness, you will get the benefit. Again, there is no one-size-fits-all method to buying life insurance, but having no or few riders as possible will keep your rates low.
6. Independent Financial Planner
As I said, agents tend to be biased on their products because of factors such as quotas and commissions and many more. Also, sometimes, they only know their products features and they have no idea about other types of insurance products so some of them thought that they have the best product in the whole universe. If you have some cash to spare, a good move is to seek out an independent financial advisor or a Registered Financial Planner (RFP) which is being paid by the advice and consultation and not by selling products. With that, you are sure that they work for your best interest and not for any insurance or investment company.
7. Get It Now!
The best time to get a life insurance is now! The younger and healthier you are, the cheaper the cost! The premiums are cheaper when you are younger. So the best deal that you can get is now especially if there are expected major changes in your life in few years time like marriage or having children. Why? Because you may never know when will your physical and financial health change. So why buy when you have those health and financial complications? The best time to buy insurance is when you do not need it.
8. Savings, Discounts, Rebates
There are many ways to choose if you really want to save from your life and non-life insurances like car, home etc., One is to negotiate with an agent if they can give you discounts if you refer someone to him or get referral fees from each closed client. Second way is being an agent or broker, you just need to qualify yourself and you can now be an agent of your own insurance needs or you can do it as your part time job too and earn additional income.
I know insurance agents who quit their job because they are more happy and successful being agents than being employees. Remember, any savings from your insurance or investments can make a big difference especially if you invested it in mutual funds or stocks and compound it thru time.
Yes, you got the cheapest insurance but does it have the credibility? So make sure your life insurance company is legit, stable and financially healthy. How? Call the insurance company itself, or the insurance commission, search in the web. Most of the time, Insurance Commission publishes periodical reports concerning insurance companies. It is better to be safe than sorry. This is hard earned money. Right?
Now. What are the factors considered in your life insurance price?
Yes, there are factors the affect life insurance prices especially for critical illness benefit add-on. These are the following:
- Health Condition
- Family history
- Lifestyle (high-risk activities)
So there are no fixed rates for life insurances and it really varies per person since we differ in the factors given above. So good luck in buying your insurance!
Just give me a message if you want some clarifications or guidance. =)
Laurent Dionisio, CPA, RFP©
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