Many people are overwhelmed by the amount of life insurance that is recommended by life insurance calculators. While everyone wants to leave a legacy that will protect and care for the loved ones who are left behind, life insurance can be costly and things like age and health conditions can affect your ability to qualify. How can you get the best life insurance payout for your loved ones at the most reasonable cost? Fortunately, there are some insider tips you can use to increase your benefits without overspending on premiums.
Buy As Soon as Possible
Every day you wait to take out a life insurance policy is another day that your premiums are likely to go up. As you age, your premiums get higher simply because the likelihood of health concerns increases with age, as does the likelihood of your insurance policy being needed.
You never know when your health could change. Once you have been diagnosed with a condition, you will find that insurance rates go up, and in some cases you may not qualify at all. Age and health are two of the top factors that affect life insurance premiums.
You will qualify for the highest amount of coverage at the lowest price when you are young and healthy. The sooner you take out a policy, the bigger your payout for future beneficiaries will be, even if you don’t know who that might be just yet.
Don’t Touch The Cash Value
Universal or whole life insurance comes with a particular perk – a cash accumulation account. As you pay your premiums, a portion goes into a cash account that will grow over time. Whole life insurance is like an investment - it will earn you interest and is available to you to use as a cash surrender or a loan in the future.
Leaving that account alone, however, is the simplest way to ensure a bigger life insurance payout. The full amount of that account will be added on top of the benefit amount of your life insurance policy when it pays out upon your death. This means that your beneficiaries will get the face value of the policy plus the amount in your cash accumulation account, for a larger payout than the face value alone.
If you have taken out a loan against the policy and haven’t paid it back at the time of your death, this will adversely affect the amount of money your beneficiaries will receive rather than increasing it.
Buy Multiple Policies - Universal & Term Life Insurance
A million dollar universal life insurance policy will come with some very big premiums, but there are ways to get that amount as a payout with lower rates. Combining multiple policies is a good way to get more coverage for less.
The most common method of doing this is to take out both a universal life insurance policy and a term policy. Because term life insurance has an expiration date, it costs less to take out large policies. The insurance company’s risk is reduced because they are offering coverage for a limited number of years, anywhere from 5 to 30 years, so they offer better rates.
A term policy with a large face value will give you a bigger payout during the years you need it most, usually when you have a mortgage or children still living at home. Having a universal policy in combination with a term policy is the best of both worlds – lifelong coverage with a larger payout during the most vital years for your loved ones.
Don’t Cancel or Let the Policy Lapse
Never cancel a life insurance policy or allow the coverage to lapse if you can help it. Taking out a new policy will almost always mean higher premiums, especially if it has been a long time since you started the current policy. You may be required to take a new medical exam, which could negatively impact your ability to get new coverage or your premiums.
If you feel you need a larger payout on your life insurance policy, it’s always best to take out a new policy on top of the one already in force. That way, you can keep that coverage at a lower premium, and add only the additional amount you need at the higher premium. You will get a larger total benefit amount for less.
Remember that even if you have a job that provides some life insurance, it’s unlikely to be a large amount and may disappear if you change jobs. It’s always better to combine employer health insurance with your own policy – it will give you a bigger payout, and allow you to keep coverage even if you change jobs.