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How to Keep Your Life Insurance Cheap

January 25, 2013 By Jeff Rose 11 Comments

Life insurance can be pretty hard on the wallet. In fact, many people forego getting life insurance altogether because they think it costs too much.

My response to that – “B.S.!” A recent study by LIMRA proved this showing that consumers overestimate the actual cost of life insurance by 3 times. If you are healthy, life insurance is cheap. The study showed that a healthy 30 year-old male can get $250k of coverage for roughly $150. That’s $150 for the entire year!

Okay, now that we understand that life insurance is cheap, let’s address some of issues that can cause your life insurance premiums to increase.

Life Insurance Costs

The price of life insurance relies on a variety of factors, many of which can be controlled by you. By making a few lifestyle changes and shopping around, life insurance can be something that is very affordable and not hurtful to your budget.

One way to lower the costs of term life insurance is to stay in good health. Duh, right? Insurance companies base premiums on the health of the individual. If you are considered to be high risk, your premiums will be higher. People who are overweight, frequent smokers and drinkers, have pre-existing conditions, or partake in high risk behaviors will have higher premiums.

Keep your life insurance cheapFor example, if you are buying life insurance online and are a diabetic, it may be hard to find insurance. Keep in mind it’s not impossible as we’ve helped plenty of diabetics get life insurance. You’re just not going to get approved for a Preferred Best rating class.

People who partake in activities such as sky diving, extreme sports bungee jumping and other risky behaviors will have higher premiums as well. If you are a smoker and have had health problems in the past, you will also be considered high risk, and therefore will have to pay higher premiums.

What really affects your life insurance rate is when you have multiple health issues. Being a diabetic won’t hurt you as much. But if you’re a diabetic, overweight, have high cholesterol, and smoke; then expect your life insurance rate to be considerably higher.

To prevent this, simply try to live a healthier lifestyle. People who live risk-free lifestyles and are in prime health will have no problem getting term life insurance, and will get lower premiums as well.

Independence is the Key

Getting life insurance online quotes nowadays is super easy and should only take you a few minutes. Just be sure to shop around when buying life insurance, or at least partner with an independent agent that has the ability to shop around with multiple carriers. One recent example was a guy who contacted me that already had a $1 million term policy with New York Life. He was paying around $1,400 a year for his policy and thought he had the best rate.

When we shopped it around we found several carriers that were significantly less with the cheapest coming in at $800 a year. He saved over $600 and all he had to was make a phone call!

I had a similar experience when I consolidated all my term policies into one $2.5 million term policy. I was able to get $250k more coverage for $400 less per year.

Remember this: Life Insurance is a commodity. A knowledgeable independent agent will be able to assist you finding an affordable term life policy than an agent that only represents on carrier.

Buying life insurance does not have to be difficult and definitely should not be overlooked because you think it costs to much.

Have you put off buying life insurance? If so, what’s holding you back?

Filed Under: Insurance Tagged With: life insurance

The Life Insurance Movement

August 22, 2012 By Shane Ede 9 Comments

Much like the Roth IRA movement that I participated in a while back, Jeff from Good Financial Cents is spearheading a Life Insurance movement today.  The movement is designed to help educate people on the different types of life insurance, the ways to go about getting life insurance, and on how life insurance works, in general.

I’m sure we’ll see lots and lots of excellent articles to help educate the community.  If you want to check them out, Jeff has compiled a list of all the participants and posted them on the Life Insurance Movement homepage.

Where do I stand on life insurance?

I used to be on the fence.  On the one hand, there is a very strong argument for it.  On the other hand, it can be pretty draining on your finances, for something you don’t use (hopefully).

For a young person, struggling with debt and bills, that extra $50-$60 a month to cover my wife and I is a not insignificant chunk of money.  Neither of us is very old, and our probability of dying is pretty small.  So, why spend that money on something that we have no plan on using when it could just as easily go towards paying off some bill?  Maybe when we’re older, we thought, we’ll get ourselves some life insurance.  You know, when we can “afford” it.  I know there are quite a few of you out there who agree with that statement.

But, here’s the thing.  I buy car insurance to help pay for damages to my car should I get in an accident.  I’ve used that car insurance.  My wife and I are good drivers, and neither of us has been in an accident that has been directly our fault.  The few accidents we have been in have always been someone else’s fault.  We had very little control over whether we got into that accident or not.

Life insurance isn’t all that much unlike car insurance.  If car insurance only paid out if you were at fault in the accident, I’d never buy it.  After all, I have never been in an accident that was my fault.  Likewise, if life insurance only paid out if you died of natural causes, it wouldn’t make much sense, statistically, to purchase any before you were at least 45 years old.  But, we all know that people don’t just die of natural causes.  They die in all manner of accidents too.  And those accidents don’t just happen to people of a certain age.  So, it’s really the accidental, not-your-fault sort of death that you are insuring against.  And you have no control over that.  And, should you die as a result of one of those accidents, will your spouse and family be able to pay the bills?  Or, will they be forced to sell the house to pay for the funeral?  Do you really want them to have to make that decision if you die?

What kind of Life Insurance should I get?

There are basically two kinds of life insurance.  Term life, and whole life.  The difference is in how long the term of the insurance is, and how much the premiums are for the coverage level.  A whole life insurance policy is good for your whole life.  Because it’s good for your whole life, the premiums are usually higher for the coverages.  A term life insurance policy is only good for a set term.  It might be a 10-year term life policy, and be valid for 10 years from the purchase date.  At the end of the 10 years, you have to purchase a new plan.  When you are young, the term life policies have much cheaper premiums because, statistically, you aren’t very likely to die young, and so, the chances of having to pay out on the plan is pretty small.  When you renew after the 10 years, the new plan would be based on your age at the time, and would be slightly more expensive because of a higher probability of death.

I can’t really tell you which is the best for you, though.  It’s something that you, and maybe a good financial planner, should look very hard at.  You need to educate yourself on the different types too!  I encourage you to click that link above, take a look at all the articles that are part of the life insurance movement, and find out as much as you can about life insurance.  Being educated on the subject will make it easier for you to spot bad policies, and find one that will fit your financial needs.

How much life insurance do I need?

Clearly, we’d all like to have a life insurance policy of several million dollars.  Some amount that would set our family up to never have to worry about money again should we die.  In reality, that just isn’t usually possible.  As the amount of the policy goes up, so do the premiums you pay to keep the policy.  What you really want is a policy that will pay out enough to make the transition from a two person led household, to a one person led household.

  • If you’re single, a policy that would pay off your debt, and pay for the funeral is likely enough.
  • If you’re married, with no children, a policy that can pay off the debt, the funeral, and replace your salary for a couple of years is a good policy.
  • If you’re married, with children, a policy that can pay off the debt, the funeral, and replace 5-10 years of your salary with some left over is an excellent idea.

Obviously, all of that is partially determined by what size policy you can afford.  By “afford”, I don’t mean afford in the way you likely do.  I don’t mean, after you’ve eaten out several times in the month, how much money is left over to buy life insurance.  I mean, it should be included in your budget, just like car insurance, your mortgage, and your utility bills.  When all of that, plus your life insurance premium is paid, you still need to be able to keep your bills current, and buy food to stock the refrigerator.  That kind of “afford”.

In the end, when you go and read all the other articles that are part of the life insurance movement, you’ll likely find several viewpoints that clash with mine.  You’ll find people who think that whole life insurance is better than term life insurance.  You’ll even find people who don’t think you need life insurance at all.  I think the important part is that you think about life insurance, learn about life insurance, and then make the decision yourself (preferably with help) on whether you want life insurance, what kind of life insurance you want, and how much you want the policy to be.

Tip: Check with your employer.  Some companies are offering life insurance to their employees.

For me, I think that life insurance of some sort should be mandatory, just like car insurance.  There should be state required minimums that you have to carry.  Far too many people are leaving behind families without any sort of coverage at all.  Even if it’s a small policy that can cover funeral expenses, that’s better than nothing at all, and you can increase it later too!

Filed Under: Children, Insurance, Married Money, Personal Finance Education Tagged With: Insurance, life insurance, life insurance movement, term life, term life insurance, whole life, whole life insurance

When Do You Need Umbrella Insurance?

September 7, 2020 By MelissaB Leave a Comment

You likely have the insurance you’re required to get, such as auto and home insurance, and you probably have health insurance, and hopefully life insurance.  For many, that’s enough insurance to adequately protect you and your assets.  However, in some cases, you may also want to consider more coverage.  If you’re wondering when do you need umbrella insurance, there are several situation when buying it may be wise.

When Do You Need Umbrella Insurance?

What Is Umbrella Insurance?

Think of umbrella insurance as an extension of the auto and home insurance you already have in place.  If you have an auto policy with a $500,000 cap for injuries sustained, and you have an accident in which several people are severely injured, that $500K may be used in very little time.  When that amount is exhausted, umbrella insurance steps in and covers the rest of the costs, up to the limit of the policy.

When Do You Need Umbrella Insurance?

Likely, most people living low risk lives do not need umbrella insurance.  The basic insurance they have in place will cover them.  However, there are some times when you’d benefit from umbrella insurance.

You Have Significant Assets

If you have assets over $500,000, you may want to consider an umbrella policy.

You Have a Teenage Driver in the Home

When Do You Need Umbrella Insurance?
Photo by Matt Chesin on Unsplash

Teens are inexperienced and can be reckless, increasing your liability.

You Frequently Have Visitors to Your Home

More visitors mean more chances for injuries or accidents to occur.

You Have a Trampoline

Fun, but an accident waiting to happen, especially if you don’t have net fencing around it.

You Have a Rental Home

A rental home can be a great income source, but having one opens you up to lawsuits and expenses, especially if someone is injured or if the house sustains damage in a fire or other weather-related event.

You Have a Pool

Minimize your liability by having a fence around your pool, but still, someone might drown or fall and hurt themselves.

You Have a Dog

You may think your dog is gentle, but it only takes once for a dog to get aggressive and bite someone.

Caveats

There are two important pieces of information, should you be considering purchasing umbrella insurance.

First, your rates on your existing auto and home insurance policies will likely go up.  If you buy your umbrella policy from the same company that you purchase your auto and home insurance, they may first want you to increase your coverage for those policies.  The umbrella pays out only AFTER the auto or home insurance is exhausted, so they want those limits to be high enough, which raises your premiums.

Second, if you are sued in the future and have your auto, home, and umbrella insurance with the same company, the insurer may hire you an excellent lawyer because they want to avoid paying out the money, if they can.

Few people discuss this type of insurance, and most people don’t need it.  However, if you have liabilities in your life, such as a pool where someone may drown or slip on wet tile and hurt themselves, you may want the peace of mind that umbrella insurance offers.

Read More

Does Your Car Insurance Pay for These Items?

When Do You No Longer Need Life Insurance?

4 Insurance Policies That Will Save You Money in the Long Run

Filed Under: Insurance Tagged With: Insurance, umbrella insurance

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