Get the Best Rate on Life Insurance
Follow these tips so you won't pay more than you have to.
Buying life insurance can be intimidating. But don't let that discourage you from trying to get the best deal on the policy that's right for you.
Because most of us aren't perfect, insurers ask a lot of questions and do medical tests when you apply for coverage to determine how much of a risk you are to insure. The bigger the risk you are, the higher the rate you'll have to pay.
So if you're getting life insurance for the first time or thinking about finding a new policy with a lower premium, it pays to know what criteria insurers use when setting rates and what you can do to improve your chances of getting the best price.
Of course, before shopping around for the best deals, remember to figure out how much life insurance you need and what type is best for you. You don't want to skimp to save money by buying a policy that will expire before you need it or that doesn't pay out enough to cover your loved ones' basic needs.
What to know about factors that affect rates
Your age and gender. These two factors have the biggest impact on your insurance rate, says Ray Dinstel, the chief underwriter for Genworth's life and long-term-care insurance. Clearly, youth has its advantages when it comes to getting a good life-insurance rate. And women usually get lower rates because they have longer life expectancies (giving the insurance company more years to collect premiums before it has to make a payout).
TIP: Apply when you're young(er). But remember, you really only need life insurance if someone else is depending on your income, such as a spouse or a child. So if you're single and in your twenties, don't feel like you have to rush to get a policy now just to snag a good rate. You still can get insurers' preferred rates in your thirties and forties.
Your smoking habits. If you smoke, expect to pay a lot more for life insurance. For example, a 40-year-old cigarette smoker will pay triple the rate of a non-smoker, says Byron Udell, founder and chief executive of AccuQuote, an online provider of life-insurance quotes.
TIP: The best way to cut your rate, Udell says, is to stop smoking for a year or more. Some companies require you to be smoke-free for three or five years to get their best rate.
Your health. High cholesterol is a strike against you. Cancer is an even bigger strike. However, insurers consider diabetes, hypertension, most digestive disorders and asthma as minor problems if you're getting proper medical care for these conditions, Dinstel says.
TIP: "Don't think because you a have health problem that your rates will be outrageous," says Jim Davis, vice-president of underwriting at Phoenix Companies. For example, a non-insulin-dependent diabetic with a great family history and good health otherwise could get the standard rate, he says.
Get a physical before applying to find out if you have high blood pressure, high cholesterol or any other treatable condition. Start taking medication to get it under control.
Most importantly, don't wait until you have a serious ailment to apply for life insurance. If you do have a health condition, work with a broker who knows which companies would be more likely to insure you at the best rate.
Your weight. Because obesity and several other health conditions go hand in hand, insurers take your weight into consideration. For example, a 6-foot, 205-pound man usually can qualify for the best rate, Udell says. But a few more pounds would push him into a higher rate. The weight ranges to qualify for the best rates vary from company to company.
TIP: If shedding a few pounds before applying for coverage is out of the question, use an online quote site, such as AccuQuote or Insure.com. The site will let you see the underwriting criteria of several companies so you can find the ones with more-lenient weight requirements. Women who are overweight should apply to companies that use unisex weight tables, which are geared more toward men's higher weight ranges.
Your family history. All insurers will ask whether anyone in your family has been diagnosed with, or died of, heart disease, Udell says. Some will ask whether your parents or siblings have had cancer.
TIP: Again, use an online quote site or shop around to find insurers with more-lenient standards. For example, say you had a parent who died of a heart attack at age 69. That wouldn't preclude you from getting the best rate because some insurers ask whether you had a parent who died of heart disease before age 60 (as opposed to age 70, which is the standard many insurers use).
Your driving record. We're talking about life insurance, not car insurance, right? So why does your driving record matter? "If you're breaking traffic laws, you're more likely to be involved in a life-threatening situation," Udell says. And that makes you more risky to insure.
Most companies want to know if you have had a moving violation in the past three years or a DUI in the past five or ten years. Wrecks won't hurt your rate -- unless you were cited for a moving violation as a result of the accident.
TIP: If you received just one speeding ticket in the past three years, you still can get a good rate. But if your lead foot has gotten you in trouble several times, you might want to wait a few years before applying (if that's an option) and lay off the gas pedal.
Your job. Davis of Phoenix Companies says he recently got an application from a man who was going to drive a fuel truck for Halliburton in Iraq. That's exactly the type of job that screams "RISK" to insurers. Your job could force you into a high rate tier or make it difficult to get life insurance.
TIP: Talk to a broker who deals with numerous carriers and knows which ones will insure people with risky jobs.
Your hobbies. So you like to fly planes, scuba dive in underwater caves or race cars in your spare time? Don't expect to get a good rate on life insurance. In fact, people who participate in hazardous sports can expect to pay a much higher rate than what the more-cautious of us pay.
TIP: Take up safer sports, or talk to a broker who has experience finding insurance for people with extreme hobbies.
Your travel plans. Insurers want to know if you'll be heading to risky parts of the world. If you are, you might have to pay a higher premium for life insurance. If you fib on this application question, you could get caught. For example, Davis says, the insurer might see in your medical record that you've recently gotten shots for your overseas travel.
TIP: Comparison shop because the rules on overseas travel vary from company to company. Genworth, for example, is concerned only if you'll be in a high-risk country for at least four weeks, Dinstel says.
Your credit history. These days it seems like any time you apply for something your credit history comes into play. Life insurance is no exception. If you've filed for bankruptcy in the past five years, it can be a strike against you.
TIP: Some companies, such as Genworth, don't check your credit history. A broker or online quote service can tell you which insurers don't use this factor in setting rates. Or you could take steps to improve your credit record.
If you already have life insurance but your situation has changed since you first applied (maybe your cholesterol level is normal now, you've lost a lot of weight or given up a risky hobby), shop around to see if you can get a better rate.
Right before you apply ...
You will be asked about most -- if not all -- of the factors listed above when you fill out a life life-insurance application. Then you will have to undergo a medical exam. The experts we talked to say there are a few things you can do to improve the exam's outcome -- or at least not make your medical condition appear worse than it really is.
-- Fast 24 hours before the exam. This might help lower your cholesterol slightly.
-- Avoid alcohol and fatty and salty foods before the exam. Have no caffeine the morning of the exam.
-- Take your medications to ensure your cholesterol, blood pressure or any other condition you might have is under control.
-- Don't do a heavy workout the day before. You'll end up with an elevated protein level, which would make you seem sick.
-- Get a good night's sleep so you're rested and relaxed when you take the exam.