How to save money on Term Life Insurance | Personal Finance | Financial Literacy | Money

Summary

This video highlights the potential financial pitfalls of automatically renewing life insurance policies without reassessing your options. As costs increase significantly with age, the video illustrates how a 40-year-old may pay $30.78 monthly for a policy, but renewal at age 50 could escalate to $231.75. The difference lies in the use of select versus ultimate mortality tables for pricing. Viewers are encouraged to apply for new policies if their health remains good, ensuring better rates and continuous coverage. The importance of understanding term versus permanent policies is also mentioned, making this a valuable resource for informed decision-making.

Takeaways

• 😀 Blindly renewing a life insurance policy can result in significantly higher costs.
• 😀 Life insurance premiums increase with age due to higher mortality risk.
• 😀 A 40-year-old in good health might pay $30.78/month, but renewal at 50 could spike to $231.75/month.
• 😀 If a 50-year-old applies for a new policy while healthy, the premium could be only $71.42/month.
• 😀 Insurance companies use select mortality tables for initial pricing based on health assessments.
• 😀 Renewals use ultimate mortality tables that include the entire population, raising average costs.
• 😀 If you remain healthy, consider applying for a new policy to save on premiums.
• 😀 Always keep your existing policy until the new one is secured to ensure coverage.
• 😀 Explore conversion options from term to permanent policies if health declines.
• 😀 Engage with the community by sharing experiences and questions about life insurance.

Q & A

What happens if you blindly renew a life insurance policy?

Renewing a life insurance policy without consideration can lead to significantly higher costs, potentially amounting to hundreds or thousands of dollars.

Why do life insurance premiums increase with age?

Life insurance premiums rise with age because the likelihood of mortality increases; for example, a 100-year-old has a much higher chance of dying in the next year compared to a 25-year-old.

What factors influence the cost of life insurance?

The primary factors affecting life insurance costs are age and health, as they determine the likelihood of mortality.

What is the difference between select mortality tables and ultimate mortality tables?

Select mortality tables account for the specific health status of applicants during the initial term, while ultimate mortality tables provide general mortality statistics for the broader population in subsequent terms.

How can you save money on life insurance premiums after the initial term?

If you still qualify as healthy, you can apply for a new policy and undergo a health assessment to secure a lower premium instead of renewing the old policy at a higher rate.

What is the significance of the medical assessment when applying for life insurance?

The medical assessment helps insurers determine your current health status, which influences your premium under the select mortality table for the first term.

What should you do before canceling your current life insurance policy?

You should never cancel your existing policy until you have a new one in place to ensure continuous coverage.

What are the options if you become unhealthy before the end of your policy term?

If you become unhealthy, it's advisable to keep your existing policy despite the higher premiums, as the chances of needing to collect on the policy have increased.

Can you convert a term life insurance policy into a permanent policy?

Yes, many term life policies come with a guaranteed conversion provision that allows you to convert them into permanent policies at any time.

What future content can viewers expect related to life insurance?

The creator plans to produce an explainer video on life insurance to help viewers understand how to determine the right amount of coverage for different situations.