Cheaper Premiums for Life Insurance

All of us want cheaper premiums for life insurance; it’s only human nature to want to pay as less as possible but get as much as possible.  You may think that $50.00 is cheaper than $75.00, but what if I told you it is not?

We often equate a lower price as being cheaper, but that is not always the case.  What you see in this example is a Price, but over time there is a Cost, but lowest Price does not always mean lower Cost, therefore is it cheaper.

Price vs Cost

Let’s look at an extreme example to make the point.  If I purchased a widget for $50 per month and the widget went up by 10% per year, the widget in 10 years would have cost me $9562,45 but let’s say I purchased a widget from another seller. It was $60 per month but only went up by 2.5% per year, the widget would have cost me $8066.43 the Price from the widget of the second seller was more, but the Cost was cheaper.

The real point is to understand the difference between Price and Cost.  Price is the Price you pay today, and Cost is what it cost you over the life of the product. Would you rather buy a top-end refrigerator/freezer for $5000 every ten years or a cheaper one for $2000 every three years?  Of course, this is purely to make a point.

Life Insurance Premiums

Cheaper premiums for life insurance can work the same way, which is why you should always talk to a good adviser who understands Price and Cost, talk to you about your priorities, and what you need in the short term and what you may need in the long term.  The longer you need your insurance the more long-term Cost should be considered and not short term price.

Most insurers offer you premium pricing options as well.  Some will offer you what they call Stepped Premium or a similar name, and this is about lower Price but allowing you to insure for more now at a lower price but over a longer period it is a higher cost.

There is also a premium option called Level Premium, where this Price is higher but the long-term Cost is much cheaper.

Which premium option is best for you?

It really comes down to your financial priorities and budget.  You may need higher insurance cover for the shorter term but may need a lower amount of insurance cover for the longer term, and having a blend of the two is quite normal.

If you need help and advice about the right cover, more premium option and pricing, please contact us today.