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You want to protect the ones you love with a life insurance policy, but you don’t want to break your budget with the cost. Life insurance may not be as expensive as you may think, and there are ways you can zero in on cheap coverage.
1. Opt for Term Life Insurance
When you purchase life insurance, you have two main options for the policy type: term life insurance and permanent life insurance.
“Term life insurance is the least expensive form of life insurance available. It provides a set amount of coverage for a fixed period, usually 10 to 30 years,” says Cliff Pendell, vice president of marketing and operations at JRC Insurance Group.
If you have short-term coverage needs, such as income replacement during your working years, term life is often the best choice.
Some life insurance companies, such as Protective Life, AIG and Banner Life offer term lengths as long as 35 and/or 40 years.
With permanent life insurance, you purchase coverage that won’t expire (as long as you pay the premiums). Permanent life insurance will cost more than term life because of this coverage length and because these policies often build cash value.
2. Buy Life Insurance When You’re Young and Healthy
It’s easy to put off a life insurance purchase from year to year. You get busy and other tasks may push life insurance down your to-do list. The danger in delaying a purchase is cost: Your life insurance quotes will go up every year you get older, even if you’re in great health. And if you develop medical conditions, life insurance quotes can spike.
“How much you pay for life insurance depends largely on your age and health, which often go hand-in-hand—meaning as people age, statistically they are more prone to illness or other health complications,” says Caroline Brooks, assistant vice president and counsel, head of advanced markets at John Hancock. “Locking in insurability when you are young can give you coverage for a lower cost now, but also gives you lots of flexibility down the line.”
For example, you could purchase term insurance to cover income replacement and then later opt to convert the policy to a permanent life insurance product if your long-term needs change. So if you know you need life insurance, it’s prudent to buy it sooner rather than later in order to lock in the best rate.
“If you must buy life insurance later on, try to live an active lifestyle, and avoid habits like smoking. You’ll have a much better chance of qualifying for a preferred rate. Some companies even offer credits to people that exercise regularly,” says Pendell.
3. Skip Non-Essential Riders
Life insurance companies offer a wide selection of life insurance riders that provide extra coverage features. Options may include reimbursement for long-term care costs, added coverage for your spouse, or payment waivers if you become disabled after buying the policy.
While additional coverage is attractive and provides more protection, it may not be worth the extra cost, especially if you’re looking for cheap life insurance.
4. Try Laddering Life Insurance Policies
Another significant factor determining life insurance cost is the amount of coverage you buy.
Instead of buying one large policy that encompasses all your coverage needs, you may be able to save money by buying multiple smaller policies using a strategy known as laddering.
Using life insurance laddering, you buy multiple policies that expire at different times. This can allow you to have more coverage earlier on in your life when you may need it most—for instance, when you have young children and a mortgage. As policies expire, you gradually decrease coverage as your life insurance needs diminish.
For example, you might buy a term life policy to cover the years until your retirement and a universal life policy to cover final expenses.
5. Buy Life Insurance With Medical Underwriting
Most life insurance policies require medical underwriting. This usually means that the application process includes a life insurance medical exam. There are various types of policies that don’t require an exam, but they tend to be higher cost for the coverage you get, such as simplified issue life insurance.
“If a life insurance provider is unable to evaluate your health before offering you a policy, they will have to charge you a higher rate to offset their risk,” explains Pendell.
There are some life insurance providers that offer no-exam policies, but rates are often higher and maximum coverage amounts may be lower than what you need.
If you’re healthy, selecting a policy that’s medically underwritten can help you find cheap life insurance.
Compare Quotes to Get Cheap Rates
Life insurance rates can vary dramatically among insurance companies. Compare multiple quotes before you buy a policy. Life insurance quotes are free and easy to get.
Be aware that your final life insurance quote might be higher (or lower) than your initial quote because an initial life insurance quote is only a best estimate. Once the insurer has looked at your medical history, prescription use, driving record and other factors, the final quote can change.
It’s smart to work with an independent life insurance agent. A licensed agent can quickly compare life insurance rates from multiple providers and find the cheapest option based on your desired coverage amount, age, lifestyle and health.
A common misconception about life insurance is that it’s expensive. More than half of respondents in the 2021 Life Insurance Barometer Study estimated that life insurance costs three times more than it actually does, according to LIMRA, an industry-funded research group.
According to the latest Policygenius Life Insurance Life Insurance Price Index, here are examples of average prices for 20-year term life insurance for healthy non-smokers:
- $16.54 a month for a $250,000 policy
- $25.47 a month for a $500,000 policy
- $42.75 a month for a $1 million policy
- $18.78 a month for a $250,000 policy
- $30.37 a month for a $500,000 policy
- $51.87 a month for a $1 million policy