FREQUENTLY ASKED QUESTIONS

If you are looking for an inexpensive life insurance policy, the good news is that you probably have some options. There are many good options to get coverage for less than $30 a month. Life insurance rates also keep coming down as people continue to live longer and survive diseases better, and life insurance companies are continuing to add more product offerings to their lines. Here we explore different options to get you the lowest cost life insurance policy.

 

Standard Level Term Life Insurance is the Cheapest Premium

If you are searching out the cheapest life insurance, you will want to look at term life insurance policies. The least expensive type of life insurance policy judged by the size of premium payments and the cost of insurance is always going to be a term life insurance policy. This is because term life insurance has no cash value, and expires before the insured is hypothetically expected to pass away. Term life insurance is not permanent, and insurance companies calculate that the chances of an insured person dying during the policy’s active years are lower if the insurance will only last for a limited amount of years.

While term life insurance is the least expensive policy to own when viewed through the spectrum of the total cost of insurance, term life insurance provides the lowest expected rate of return for a policy owner, almost zero. If you have consecutive term life insurance coverage over the course of your life, you will still expend a chunk of money annually or monthly, and as you get older term coverage gets more and more expensive to implement.

Policy TypeTerm LifeWhole LifeGroup Life or Employer Offered LifeUniversal or Variable Universal Life
Premium AmountLowest on open marketHighest until dividends rise high enough to payPossibly free or inexpensive, but limited face amountFlexible but only works when very high level paid into policy
PermanentNoYesNoYes
Good InvestmentNot an investmentYesNot an investmentNot usually
Wise ChoiceYes for most peopleYes for someYes for everyoneNot usually

Term is Only a Few Dollars a Month

The fantastic thing about term life insurance is that you can get coverage for only a few dollars a month. You see offers for policies like this all the time on the television and hear them on the radio. Keep in mind, that those advertisements are usually only showing you a low death benefit, so they are not really enough coverage for most people. However, there is truth to the fact that most people can get a really good amount of coverage for a really affordable rate. A policy for $250,000 may cost a 35-year-old male who is in good health may get coverage for about $10 a month! When you compare it to permanent forms of life insurance, you can really see that term is the cheapest life insurance that you can buy.

The Cheapest Policy may not be the Best

Keep in mind that the least expensive policy that you can find may not be the best policy for you. Life insurance is more complex than most other consumer insurance. You need to make sure that you have enough coverage, that you have that coverage from the right amount of time, and that you purchase that coverage from a life insurance company that is going to be around for a long period of time. Do not assume that all life insurance coverage is equal.

Group Life or Employer Offered Life Insurance

If your employer offers life insurance coverage as a benefit, it likely provides you some coverage for free. Normally, this is limited to either one or two times your annual salary. While this is not usually enough coverage to satisfy all of your life insurance needs, it may be, and it is a good base of coverage if not. Keep in mind that this benefit is no longer free if you are no longer employed.

You may want to ask if you can purchase additional coverage at a group rate.  If so, you might be able to add a significant amount of death benefit for a reasonable cost. There is still usually a cap on the total amount of coverage, often $250,000. Your benefits administrator will be able to tell you more about the options available to you from your employer. Oftentimes group life insurance gives you the best rates unless you are very young and healthy. Because there is no underwriting if you are in poor health it is very wise to take advantage of every dollar available to you through your group life or employer-offered life insurance.

Whole Life Eventually is the “Cheapest” Long Term

A whole life insurance policy actually makes money over time. Not only because it is guaranteed to payout as long as the owner pays the premiums their whole life, but because the dividend will grow and may eventually pay the owner back more than they paid into the policy. This is especially true when the whole life insurance is purchased from a mutual life insurance company, meaning the company is actually owned by the policyholders. These whole life policies tend to pay the highest rates of dividends, and over time the dividend payment can actually grow large enough to pay the entire premium by itself and then some. This means the policy will become not only self-sustaining, but the cash surrender value will grow automatically with each passing year.

When viewed through a long term perspective, it not only is cheaper to own a whole life insurance policy, but the insurance policy can actually make you money. It is for this reason that whole life insurance is viewed as an investment and a way to save money for clients.

Whole life insurance also pays a dividend, which you can use towards premium payments. In most whole life policies, the dividend payment will eventually become larger than the premium payment, making the policy free to keep in force for the remainder of your lifetime. Your life insurance agent will be able to produce an illustration, showing projected dividends over time.

Most Affordable Life Insurance

Other Permanent Forms of Life Insurance

Variable universal life insurance policies and even traditional universal life insurance policies may provide a higher rate of return than a whole life insurance policy, but they more often provide a lower rate of return. The total rate of return depends more on funding levels, the timing of funding, market performance, and changes to the cost of insurance over time. Generally speaking, these are a riskier form of life insurance coverage than whole life insurance and may result in large losses for the owner. Poorly funded policies may end up being much more expensive than an equivalent level term policy over time, but well funded, highly performing policies may almost rival investment account returns while also providing life insurance protection. These are sophisticated policies that we do not recommend to clients.

Cheapest Life Insurance Companies

Here is a list of the cheapest life insurance companies for a 38-year-old female in good health, seeking term life insurance. Keep in mind that depending upon the age, gender, and overall health of the person seeking insurance a different company may be more or less expensive than others. The same companies are often at the top of the list for any given circumstance though.

Pacific Life Insurance

Pacific Life Insurance Company has been around for more than 150 years. They have strong financial ratings of AA- from Standard and Poor’s and A+ from A.M. Best. Pacific Life is consistently at the top of the least expensive policies. They specialize in term life insurance offerings, though they also offer whole life insurance.

Banner Life and William Penn

Banner and William Penn are divisions of Legal & General Life Insurance Company. L&G specializes in term life insurance and universal life insurance, so their rates on term insurance are very competitive. Smart agents who are trying to get their clients a good deal always look at Banner Life and William Penn. L&G has a financial rating of AA- from Standard and Poor’s and Fitch, and an A+ rating from A.M. Best, the same ratings as Pacific Life. Legal & General Life was founded in 1836.

Protective Life

Protective Life insurance company sells whole life and universal life products, but they sell more term life insurance and they compete heavily on price. Don’t let that fool you into thinking that they don’t bring a lot of value just because they are cheap. Protective Life was founded in 1907 so they have been in business for over 100 years. They also have strong financial ratings of AA- from S&P and A+ from A.M. Best. Protective is a good company to get quotes from if you are searching for cheap term life insurance.

Mutual of Omaha

Mutual of Omaha was founded in 1909 so like Protective, Pacific Life, and L&G they too have been around for over 100 years. They offer all forms of life insurance, but they sell a high quantity of term life insurance to price-conscious consumers. Mutual of Omaha enjoys an A+ rating from A.M. Best and an A+ rating from S&P. Mutual of Omaha offers term insurance for about $62 per month on a million dollars of coverage, on a 35-year-old woman in good health.

How to Get Less Expensive Life Insurance

The best way to get the best deal on life insurance is to follow some simple rules.

  • Get in shape leading up to buying a policy. If you can lose even 10-20 pounds and lower your blood pressure and cholesterol, you stand a better chance of being assigned a better health rating from the life insurance company and lowering your cost.
  • Compare quotes from multiple companies. Without going out to many companies, you don’t know for sure which can give you the least expensive policy for your particular age, sex, and health.
  • Stick to term life insurance unless you fully understand whole life and it is truly the best type of coverage for you.
  • If you buy whole life, buy it from a well established mutual company with a long track record of strong dividend payments.
  • Opt for longer length term coverage rather than planning on buying multiple shorter length policies over time. The reason is that as you age life insurance becomes much more expensive, and you may even lose your ability to obtain coverage.

Final Word on the Cheapest Forms of Life Insurance

The least expensive form of life insurance is not as simple and straightforward as it may seem. For the lowest cost of insurance and the lowest premium payments, choose term life insurance. For the best long-term value, a permanent form of life insurance such as whole life insurance will maximize the value of the premiums. And never forget, that while your employer may not be able to offer you as much group coverage as your family would need to replace your income and maintain their lifestyle, you should take advantage of your employer offered life insurance as much as you can.

3 Comments

  1. 66 yrs old and looking for
    Coverage,on fixed income so can’t afford large final coverage price
    Dave

    1. Hi Dave, you may want a term policy, or a policy with a small face amount, or a final expense/burial plan. How much coverage are you interested in?

  2. Interested i. Quote

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