Life insurance plays a valuable role in financial planning, providing families capital to pay off loans and give their loved ones proper burials. However, in LIMRA’s most recent industry survey, 41% of respondents indicated they didn’t have coverage, with the majority citing the cost of life insurance as a top factor.
However, for people in reasonably good health, it’s actually quite simple to find life insurance that costs less than a dollar per day. You just need to choose the right type of policy.
First, a few money-saving tips that apply to all policy types. Generally, policies that don’t have a cash value or investment component are going to be least expensive. Additionally, if the policy only lasts for a fixed period of time, premiums will be lower, as there’s less likelihood you’ll pass away during the period of coverage.
Be wary, though, of any life insurance policies that don’t have level premiums for the entire length of coverage. With these, premiums will multiply in price over time and if you want to find a less expensive policy later, you’ll be older when you apply, meaning you’ll qualify for worse rates.
Term Life Insurance
One of the most common reasons people buy life insurance is to make sure their family would be able to pay off the mortgage on their home in the event they died. Parents also often seek to purchase coverage to cover the cost of sending their kids to college. These types of scenarios are exactly what term life insurance is designed to cover, by offering a large amount of coverage inexpensively for a fixed period of time.
Term life insurance is regularly recommended by financial advisors, since these policies are more flexible and significantly less expensive than permanent coverage. An oft-repeated mantra throughout the industry is actually “buy term and invest the difference.”As in, the cost to purchase an equal level of whole life insurance coverage is typically several times the cost of a term policy, and the savings for choosing the term option can be invested to gain further savings still.
Nearly every insurer offers term life insurance and policies can regularly provide up to $10 million in death benefit. The only restriction on term life insurance, as mentioned earlier, is that policies extend for a fixed amount of time, such as 20 or 30 years.
Guaranteed Universal Life Insurance
If you prefer permanent financial protection for your family, rather than coverage for only a fixed period of time, you should consider opting for guaranteed universal life insurance. Guaranteed universal life insurance is usually the least expensive way to purchase lifelong coverage. Unlike other forms of permanent life insurance, such as whole life or variable life policies, guaranteed universal life insurance typically has little to no cash value--meaning it cannot be redeemed at will in exchange for a sum of money. Instead, guaranteed universal coverage behaves like a term life insurance policy that simply lasts until you’re over 100.
Guaranteed universal life insurance is also a great option if you want permanent coverage but have pre-existing medical conditions that would preclude you from passing the medical exam that’s typically required to obtain whole life insurance. If you’re seeking a simplified issue policy, --for which only a medical questionnaire is required, rather than a full exam--a wider range of death benefits are typically offered for simplified issue guaranteed universal policies than for simplified issue whole life insurance (which typically have a maximum face value of around $50,000).
Accidental Death & Dismemberment Insurance
While accidental death and dismemberment insurance (AD&D) is available as a standalone policy, it also regularly offered as an add-on to a life insurance policy. AD&D includes accidental death insurance, so your beneficiary will receive a payout should you pass away due to an accident. However, such a policy will also pay a benefit should you lose a limb or certain necessary bodily functions. Sun Life Financial, for example, pays a benefit if you become a paraplegic or lose your vision in an accident.
Only one in twenty deaths is due to an accident, which is a key reason that AD&D insurance is inexpensive. You can typically get hundreds of thousands of dollars in coverage for a premium of less than $15 per month.
Accidental death insurance is primarily valuable if your family would be able to handle the costs of your passing so long as they had warning, but would have greater challenges if you died suddenly. As an example, if you recently moved into a larger house and the majority of your savings had gone towards the mortgage, your family would have little money on hand to deal with your sudden passing. However, given several months, they might be able to save or downsize enough to be able to pay for your medical care and passing.