More Term Life for the Money

04/27/2015 03:50 pm ET | Updated Jun 27, 2015

Not everyone needs life insurance. If you don't have loved ones who depend on your income and future earnings, then there may be better ways to invest your money. But if you have dependents who will need to cover living expenses, pay off a mortgage or plan for college, then you should at least find out how easy and relatively inexpensive it is these days to buy simple term insurance.

1. Term insurance doesn't build cash value, but it can guarantee level payments on coverage for up to 20 or even 30 years -- perhaps enough to put your children through college or pay off a mortgage. It allows you to buy the most coverage for the least amount of money each year, and it stays in force as long as you pay the annual premium.

2. Term prices are probably less expensive than you expect. But it pays to shop around to get the best deal. According to, a 42-year-old man in excellent health and a non-smoker could get $500,000 of 20-year term insurance for only $434 a year. (That's just over a dollar a day!) If not in the top-rated health category, that man would pay an extra $110 per year. And look at the impact of smoking: Even in current good health, that 42-year-old male smoker would pay $1,869 a year in premiums!

A woman pays less for the same policy, reflecting the mortality tables. A 42-year-old woman in top health and a non-smoker would pay only $363 a year for $500,000 on 20-year level term or $449 per year if she doesn't qualify as "preferred plus." But if she smokes, the premium rises to $1,429 per year!

3. Buy more coverage and pay less frequently, and you can save a lot of money. If you buy a larger policy, the cost per thousand declines. And paying the premiums annually instead of monthly is roughly equivalent to saving 11 percent in finance charges.

4. Coverage on most term policies can be extended through "conversion." Twenty or 30 years seems like a long time when you consider life insurance. But when the term ends, many folks still feel a need to be insured. Up to a certain age, your policy should allow you to "convert" into a permanent policy. This may not be the best or least expensive way to get a policy at that point, but if your health has changed and you can't get new coverage, this provision will be important.

5. Insurance companies differ on how they price and accept applicants. One good reason to deal with a large, independent agency is its knowledge of insurers' priorities. Some carriers and policies don't require a medical exam -- although the carrier will refuse to pay out if you lied in answering health questions on the application. Buying larger face amounts will require medical underwriting -- blood and urine tests, and even an EKG.

Is life insurance a waste of money? Only if you never collect. As Byron Udell, president of, says, "The only way to 'win' the game of life insurance is to die with your policy in force!" Otherwise, the insurer keeps all the premiums it has collected over the years (and the money they earn on it). So at some point you might want to get into a more permanent policy, one that could build savings and tax advantages -- and last your lifetime.

But the first, and most important, rule for insurance is to buy as much coverage as you can to take care of your loved ones while the need is greatest. You're not only buying financial security; you're buying peace of mind. And that's The Savage Truth.

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