How to save money on life insurance

Whether it’s being used to protect against lost income, business debts, a mortgage or any number of other reasons, the majority of Canadians will require life insurance at some point in their lives.

While the monthly cost for this coverage is typically not that much, cutting even a few dollars off the price can have a significant impact when you pay these premiums for many years.

Here are a few tips to help you get the best deal on the coverage that’s right for you:

1. Consider paying for your policy annually instead of monthly. Almost all insurance companies offer a discount for those who pay once per year and this discount, for an average sized policy, is usually around eight per cent which equates to almost one month’s premium!

2. Quit smoking. Depending on your age, your life insurance premiums will roughly double if you smoke. For example, a policy that would cost a non-smoker $75 per month will cost those that smoke around $150. Over 25 years, that extra premium will amount to an extra cost of $22,500!

Most companies consider you a non-smoker if you haven’t had any tobacco products for a period of 12 months so there’s no better time than now to quit! But don’t wait an extra 12 months before you apply – it’s better to apply now and pay smoker rates for one year and then have the policy adjusted to non-smoker rates when your 12 months is up.

3. Buy term insurance and skip the permanent stuff. While whole life and universal life (the two main permanent insurance types) both have their places and can be excellent options for the right person, the majority of people really only need term coverage.

Term insurance is far cheaper and you can more easily afford the amount of insurance you really need to provide proper protection. When selecting term coverage, it’s critically important to get the right length of term so that you don’t face a costly renewal. If you need insurance for 20 years, buy a 20 year term instead of buying a 10 year term with plans to renew it. Terms can be purchased from 5-40 years in length and can also be bought with a fixed “term to age 65” depending on your needs.

4. Make sure you shop around. There is no good reason to consider buying insurance from an advisor that works for one specific insurance company or bank. No matter what you are told, there is no one insurance company who will have the best price all the time. In reality, each insurance company attempts to even out their books with a similar number of policies for people in each age group and they adjust their prices accordingly. The company who will have the best deal for you is always changing.

An independent advisor can and should give you a print out that shows every Canadian insurer’s price quote for the type of coverage you’ve decided on. From there you can look at the top couple of quotes and review the features and benefits of these best priced plans.

Purchasing life insurance is not an option or luxury but instead a necessity of financial security for most Canadians. Make sure you take the time to fully understand the different options out there and select the one that’s right for you. And while you’re at it, make sure you use these tips to get the best possible price.