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Learn How to Find Great Rates on Life Insurance Policies

by Andrew Freiburghouse and Gary P. Bangstad

Any pro-caliber shopper will tell you: there's an art to shopping. You've got to know where to look and, more importantly, how to look. Life insurance is a more weighty purchase than a new pair of shoes, however, so if shopping's your thing--and even if it's not--keep the following advice in mind when searching for a new policy.

Types of Insurance and Prices
Many accountants and financial writers want you to buy term life insurance because it's cheaper. It offers the most coverage for the least money. However, term insurance can get very expensive as you age, and most people drop these policies before their heirs ever collect on them. On the other hand, permanent (cash value) insurance plans have bigger premiums at first, but they offer some additional, very important benefits, and can actually be a better bargain in the long run.

The three most common types of permanent coverage are whole life, universal life, and variable-universal life insurance. They offer the advantages of estate planning; significant tax advantages; paid up policies with no more premiums, ever; and even the ability to borrow from the plan, perhaps for your children's college expenses.

Your Health and Price
When it comes to life insurance, starting young is a big deal. Notice the online charts at any insurance company and see how the price of coverage increases with age. Many companies assume that younger equals healthier.

However, if you are not so young, you can still improve your rates significantly by improving your health. For instance, life insurance providers have two rates, one for smokers and a much less expensive one for non-smokers. There are also ratings based on your weight, blood pressure, and cholesterol. There are even rates for your occupation, hobbies, and financial stability. Always try for the lowest rate, which is called preferred plus.

Other Cost Factors
There are other important factors to consider such as the cost of disability riders and guaranteed insurability. Ask your insurance agent to explain these important features to you. Finally, whether you're buying potatoes or insurance, it pays to buy in bulk. A $500,000 policy costs much less per thousand than a $5,000 policy costs.

The Whole Picture: More than Price
When talking to your insurance agent, ask for the ratings of the company. Some common rating agencies are A.M. Best, Moody's Investor Service, and Standard & Poor's. They monitor all insurance companies and their financial stability.

Don't worry too much, though, because there is a safety net in life insurance that guarantees against any loss to you as a policyholder. It is called the NOLHGA (National Organization of Life & Health Insurance Guaranty Associations), a voluntary association for life and health insurance companies for all 50 states.

Good News
The price of life insurance has gone way down! In fact, since 1994, premiums on standard-risk term insurance have dropped 50 percent, while those for preferred-risk customers have fallen a whopping 65 percent, according to data compiled by the Insurance Information Institute --an industry trade group. The bargain prices are a result of more competition, more efficiency by companies, and most importantly, the fact that we're all living longer.

Sources
Insurance Information Institute
Life Insurance Education Center
MSN Money
NOLHGA

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