2. Be Sure to Negotiate
Kevin Campbell thought he was just being honest a couple of
years ago when he told a medical examiner for John Alden that
he smokes a cigar about once a year. The Ohio physician, who
plays racquetball once a week and jogs regularly, had no history
of medical problems.
He figured the insurer would
understand that cigars were simply a way to mark special occasions.
No such luck. As far as John Alden was concerned, there was
no difference between Campbell and a two-pack-a-day man. The
company quoted him a $2,150 annual premium for a $1.3 million,
10-year term policy, $1,150 more than the nonsmoker's rate.
But Campbell wasn't having
it. He wrote a letter to John Alden demanding a nonsmoker's
rate. After three weeks of negotiating, the company caved
in and cut his initial quote by 50%. Says adviser Michael
Chasnoff, who helped Campbell set up the policy: "When
I started in this business, I would have never thought to
question what an insurance company told a client. Now I can't
see a reason not to." (If you do smoke, 'fess up. If
you die of a smoking-related illness, your insurer can choose
not to pay your death benefit, opting instead to return to
your beneficiaries only paid-up premiums plus interest.)
3. Buy in Bulk
If you're going to buy $240,000 of coverage, you might as
well buy $250,000. If you buy $240,000 worth, you'll pay $274.80
per year. If you buy $250,000, it will cost $260. How's that?
Sometimes more insurance costs
less, especially as you approach multiples of $250,000. So,
for example, a 35-year-old male nonsmoker buying $100,000
to $249,999 of renewable term insurance from USAA Life would
pay $1.02 per $1,000 of coverage. For $250,000 to $499,999
of coverage, the rate drops to 92 cents per $1,000.
4. Health Problems?
Seek Out a Specialist
Forrest Luu, 37, has diabetes. When he set out to buy life
insurance, he asked his insurance agent, Murray Halbfish,
to shop for a diabetics-friendly company. The best deal Halbfish
came up with: Manhattan Life Insurance, which quoted him an
annual premium of $891 for $100,000 of whole life. Other companies
wanted as much as $1,500. As Luu found out, some companies
specialize in particular diseases or lifestyles. For heart
disease, cancer or other "impaired risks," companies
such as Connecticut National and U.S. Financial offer competitive
rates. These companies employ underwriters who are trained
to analyze the extent of a given problem. Instead of lumping
all diabetics into one group, they rate differences between
diabetics who take their medication regularly and diabetics
whose disease is out of control. A person whose disease is
under control could save as much as 50% on a premium.
5. Don't Get Churned
That agent who talked you into turning in your old whole life
policy for a new one (More coverage! No extra premiums!) didn't
do you a favor. In fact, you've been scammed. More often than
not, victims of this practice, known as "churning,"
receive a bill for new premiums within a year or two —
after the value in their old policy has been exhausted. But
you can get help if you've been ripped off by your agent.
Contact your state insurance commissioner to find out how
to proceed. Dozens of companies have agreed to compensate
victims of these and other illegal practices. Don't forget
to complain to the main office of your insurance company directly.
Many insurers are now fairly quick to make whole life customers
who have been hoodwinked by their agents.
6. Clean Up Your Act
You may know that you can cut your insurance premium if you
stop smoking and lose weight, but you may not know just how
much you can save. Well, how does 50% sound? That's right,
most insurance companies charge twice as much to insure a
smoker. The rewards for getting back down to the right weight
for your height can be just as great.
That's what Quotesmith President
Robert Bland learned. When Bland, who's five feet, 11 inches
and 245 pounds, went shopping for $3 million of term, he got
premium quotes ranging from $4,000 to $7,000 a year. When
he balked at those prices, he was told that his premium would
be more like $3,000 if he were 35 pounds lighter. For the
moment, Bland has decided to go with a $4,000 policy from
Investors Life of Nebraska. All the same, he's considering
losing weight and reapplying.
7. Don't Get Taken
for a Rider
Insurance companies have come up with a host of extras to
pad your life insurance bill, most of them not worth the paper
they're printed on. Consider the accidental-death rider, more
commonly called double indemnity. For about $1 or $2 per $1,000
of coverage, an insurance company promises to pay your survivors
double the face amount of a policy if you die in an accident.
But it's foolish to speculate
on the manner of your demise, especially since accidental
death is relatively rare. If you really want to gamble, buy
lottery tickets. Buy enough coverage to support your dependents
regardless of the manner in which you shuffle off this mortal
The "waiver of premium"
rider is another to skip. Under this rider, which can cost
as much as 10% of your annual premium, your insurer will continue
your coverage in case you're disabled. But you should already
have enough disability insurance to cover living expenses.
If you do, you don't need a waiver of premium. Finally, some
companies offer spousal or dependent riders that add a term-insurance
element to your whole life policy that will cover your spouse
or your children. Chances are, if your spouse needs term insurance,
you can find a cheaper policy. And unless your child is supporting
the family, he or she doesn't need insurance.
8. Know What You're
Agents call it the "L" word. Life insurance, that
is. Some companies teach their agents never to utter the word
to prospective clients. Thus you are more likely to hear a
host of euphemisms such as mortgage-protection policy, retirement
plan and tax-free savings plan.
Don't be taken in. What agents
are selling is whole life insurance, pure and simple. In their
sales pitches, agents like to emphasize the tax-free accumulation
of cash value in a whole life policy but what they don't tell
you is the down side: High commissions, seemingly endless
payments before any sizable cash value is accumulated and
murderous penalties if you want to get out early.
9. Try a Low-Load
It's a dirty little secret that insurance agents don't want
you to know. But some companies sell life insurance at little
or no commission. That can mean big savings for you, if you're
the type who doesn't need much handholding to make a decision.
A few of them even sell whole
life policies this way. For example, a female, age
30, can buy $250,000 worth of coverage for just $162 a year.
10. Avoid Hidden Fees
Convenient monthly payments, automatically deducted from your
checking account. What an easy way to pay your life
insurance premium. But before you sign up, ask a simple
question: What's this going to cost me? At many insurers,
the answer is plenty. Metropolitan Life, for example, charges
some life policyholders fees equal to 15% to 20% of the annual
premium simply for the privilege of making monthly payments.
Charges like these are often built into the payments, so you
may not even know they put the bite on you.