6 ways to trim life insurance costs

  • Most people with term life policies are paying more than needed.
  • Today's premiums could be half what they would have been in 1990.
  • Medical advances may make previously uninsurable people eligible.

Families are taking a close look at their budgets these days to find expenses to cut. And while life insurance may seem like an easy place to save a few bucks, letting a policy lapse may be trading long-term security for short-term savings.

"The dangerous thing about tough times is that things that don't seem critical get pushed aside," says Byron Udell, founder and CEO of AccuQuote, an online insurance broker and comparison service based in Wheeling, Ill.

Udell says trimming expenses like dinner out is one thing. "But with life insurance, you are taking a big risk by letting a policy lapse," he says.

So, rather than cutting your coverage in the new year, consider these cost-saving moves instead:

1. Shop around 

People are living longer now than they ever have, and life insurance companies have taken notice. Since the mid 1990s, insurance companies across the nation have begun using new actuarial charts that reflect those longer life spans, which translates to lower life insurance rates.

That means that if you bought a policy in the years before the change, your rate is probably much higher than it needs to be.

"Most people who have term life policies are overpaying," Udell says. "Rates have come down dramatically in the last 15 years."

He says that in the mid '90s, a man in his 40s would pay $995 a year for a $500,000, 20-year policy. "And that was a terrific rate," Udell says.

Today, that same policy would likely cost just $350 a year -- less than half the cost.


"Now, you have to keep in mind, that same customer isn't 40 anymore, and so his rates would be higher, but the point is that rates have come down dramatically," he says.

Steven Weisbart, vice president and chief economist for the New York-based Insurance Information Institute, says the best answer for most people is to shop around. And since you don't have to cancel your existing life insurance policy to do that, comparing rates is risk-free, he says.

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