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a nice surprise

Life insurance may cost less than you think.
By Robin Jones

When Mike Richards found out that his wife, Linda, was having twins, he figured it was time to buy some life insurance. He wanted to ensure his family’s financial security and know that his mortgage and kids’ college tuition would be covered if something were to happen to him.

To his surprise, his policy cost less than he expected. That’s not unusual, yet many people don’t buy life insurance because they worry about the cost. Worldwide research and consulting company LIMRA recently found that 85 percent of people without life insurance chose not to buy it because they thought it’d be too expensive. And 78 percent of those who already had some life insurance didn’t buy more for the same reason.

But LIMRA also found that the average cost of a 20-year $250,000 term life insurance policy for a healthy 30-year-old was $400 per year. That’s about $33 per month, less than most 30-year-olds spend on one dinner out with friends.

Here are a few ways to make life insurance even more affordable.

Buy early. Age is probably the most important factor in determining cost. Youth is generally an advantage. For example, the policy that costs a healthy 30-year-old $400 a year could cost a healthy 50-year-old closer to $1,500. So it’s best to buy coverage as soon as someone depends on your income. If you purchase your policy when you’re young and healthy, consider locking in your low rate for as long as possible. A permanent policy like whole life or universal life might go for up to 30 years or longer.

Stay healthy. Health is generally the second most important thing insurers consider when they set premiums. Most companies will charge smokers and the obese more. Rates also increase for those with other health conditions such as high blood pressure, heart disease, or diabetes.

If you’re healthy, think about individual term insurance. A group policy through your workplace usually costs more because it has to cover the unhealthy people in the group.

Don’t overbuy. Purchasing too little life insurance risks leaving your family in a position where they can’t pay the bills. But premiums rise as coverage increases, which is why it’s important to meet with an experienced life insurance agent who can help you decide how much life insurance is right and explain the various life insurance products that may be available to you.

Consider a convertible term policy. Term life insurance, which covers you for a limited amount of time (a term), usually costs less than whole life or universal life. Those plans are referred to as permanent, because they can cover you for your entire life. Many people opt for term insurance because it’s more affordable. If you purchase term life insurance, make sure that it’s a convertible policy: one that can be converted to permanent insurance without having to re-qualify when you’re ready for a permanent policy.

Robin Jones is a contributor from Long Beach, Calif.

Your AAA life specialist can provide more information. To find one, call (855) 558-LIFE (5433), or go to AAA.com/insurance. AAA life specialists do not provide legal, tax, or financial advice.

Sep/Oct 2013 Issue

ASK AN AGENT

Montani

Q: I’ve heard of a type of life insurance where you get all of your money back. What is it?

A: Typically with term life insurance, you get nothing back if you outlive the policy. But some insurers, including AAA Life Insurance Company, offer an option called Return of Premium (ROP). If you purchase this rider, you can get 100 percent of the money paid into the policy back as long as you keep it in force for the full term.

Of course, there is a cost. For example, a $500,000 25-year term policy for a 33-year-old male may cost $76 a month with ROP and $33 without. But with ROP, you would get $22,836 back if you outlive the term–and statistics show that you likely will.

– Robert Montani
AAA Life Insurance Specialist
St. Louis, Mo.


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