How to afford life insurance, even on a budget

E*TRADE from Morgan Stanley


Summary: Cost is a common reason people give for not purchasing life insurance—but policies can be surprisingly affordable.

Learn more about life insurance.

If you're just starting to  explore  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—and it’s part of most financial plans.

There are several factors that impact the cost of life insurance, including your age, gender, health, and the type of policy you purchase.

Here are some strategies that may help make life insurance affordable.

Look for a policy that matches your needs

You don’t need 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.

You don’t need to pay for a policy that provides coverage beyond your major financial obligations.

There are many types of life insurance policies with varying death benefits,1 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, which can build a cash value over time, 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.

Many employers offer life insurance in their benefits package as well. Generally, this type of coverage is affordable, but often has low coverage limits. If your employer does offer life insurance, maximizing your employer-sponsored coverage and purchasing an additional policy on your own can be a good way to get all the coverage you need while potentially reducing costs. Additionally, as your mortgage and other debt goes down, or your dependents become independent, you may not need as many employer-based benefits.

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 pay in life insurance premiums. 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.

How can E*TRADE from Morgan Stanley help?

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Understanding exactly what life insurance is, how it works, and what it can do for you and your family will help you decide what kind of policy and coverage you may need.

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