Is life insurance as expensive as people think?
One of the most common myths about life insurance is that it's too expensive. According to the life insurance research organization, LIMRA, 81% of uninsured Americans polled said they did not purchase life insurance because it's too expensive. However, the survey also found that the majority of people overestimate the cost of life insurance by 3x or more.
To illustrate this point, LIMRA's 2022 Insurance Barometer Study asked individuals what they felt the price of a 20-year $250,000 level-term life insurance policy would be for a 30-year-old person in good health. Surprisingly, the median estimate given by those surveyed was $500 — more than three times the actual cost.
The findings from this study reveal an astounding lack of awareness about the true cost of life insurance. For this reason, it's important to do your homework and get better informed about, “how much life insurance do I need,” what policy type will best fit your budget, and to compare rates with reputable life insurance companies.
Because life insurance premiums are based on a variety of factors (your age, overall health, whether you smoke, family history, etc.), you can't predict the exact amount you may be looking at. However, the earlier you purchase a life insurance policy and the healthier you are, the more affordable it tends to be.
Another reason people don't buy life insurance is other financial priorities. In the same LIMRA survey, 75% of respondents indicated that other financial priorities was a reason for not purchasing life insurance. These priorities may include basic living expenses, or extras like Internet and cable, paying off consumer debt, and saving for retirement.
These are the priorities of fiscally-responsible adults. Who can argue with them? However, rather than dispute the priority ranking, consider how these priorities would be met if you or another wage earner in the family died prematurely. When you think about loved ones struggling to maintain their standard of living, suddenly $13.00 per month seems pretty doable.
Plus, you don't have to buy a million dollars of coverage. Even a relatively small benefit amount would prove invaluable in helping your loved ones transition during a time of crisis. It's better to have some life insurance than none at all.
3 common mistakes that can cost you
Another way to keep life insurance more affordable is to avoid these three common mistakes.
Mistake #1: Not being prepared for your exam
The very best life insurance rates go to the young and healthy. While you can't change your actual age, you can certainly improve your odds of getting better rates by being prepared for your medical exam. For example, overindulging in too much salt, sugar, coffee, fatty foods, or alcohol a day or so before your exam can raise your blood pressure and elevate your cholesterol and liver enzymes. You may not think it matters that much, but being careless about your eating and drinking habits could negatively affect your chances of obtaining a more desirable rate.
Mistake #2: Putting off buying coverage
The longer you wait, the older you become. Plus, you never know when certain health issues may crop up. Don't make the mistake of putting off buying coverage today, thinking that it'll be cheaper next year or the year after that.
Mistake #3: Not doing your homework on the company
No life insurance policy is a good deal if the company isn't financially strong enough to pay a death claim to your loved ones after you die. Because you could be paying on your life insurance for decades, you need to be sure that the company you buy a policy from has a solid financial standing. Many rating agencies such as A.M. best provide current information on the financial stability of many life insurance companies.
The bottom line is that while premiums for life insurance can vary greatly, you'll never know what that cost may be if you keep putting it off. A qualified life insurance agent or company service representative can run quotes based on your individual needs, and recommend what type of policy is best for you.