Can I afford life insurance?
Summary: Cost is a common reason people give for not purchasing life insurance—but policies can be surprisingly affordable.
If you're just starting to look into life insurance, you might be wondering how to fit the cost of a policy in with the rest of your expenses. But life insurance is a more affordable product than many people may think—even for those with tight budgets.
More than half of Americans believe that life insurance costs three times more than it actually does, and 44% of millennials overestimate the cost of life insurance by six times.1
Here are some rules of thumb that may help make life insurance affordable.
Look for a policy that matches your needs
It’s not necessary to pay for a policy that provides coverage beyond your major financial obligations. Consider what income and expenses your family would need covered, including salary, childcare or dependent care, and debts.
There are many types of life insurance policies with varying death benefits,2 coverage terms, and supplemental options. A good next step is to determine whether you want a term or permanent policy. If it's important for you to have a permanent policy, consider reducing coverage to help with costs. Or, you may choose a term policy to simply cover the most important years more fully. Check out Life Insurance 101 for more information.
It’s not necessary to pay for a policy that provides coverage beyond your major financial obligations.
The sooner the better
Timing matters for life insurance policy premiums. That's because premiums depend, in part, on your current age and health. Typically, the younger and healthier you are, the less you’ll likely pay. The longer you put off purchasing a policy, the more you risk aging into higher premium costs or getting sick or injured—factors that increase premiums.
Think of premiums as a fixed expense
Building a budget can be incredibly empowering. Incorporate the cost of policy premiums as a fixed expense in your budget, then plan around this additional expense by adjusting variable expenses if necessary. This helps you honor your financial priority to take care of your loved ones.
The bottom line
A life insurance policy doesn’t have to break the bank. In fact, it can fit a wide array of budgets. Keep it affordable by locking in a policy that meets your essential financial needs.