Let’s say you got married recently or started a family. Now that there are others who depend on your income, maybe you’re feeling a little guilty about not having life insurance. You know that the younger and healthier you are when you buy, the less you’ll pay for insurance. You’ve even looked at the two basic options. Term life is certainly cheaper than whole life, but it doesn’t accrue value, and you’d kind of like something that doesn’t depend on your death to pay a return on the investment.
The problem is cash-value life insurance can cost considerably more than term, as this example illustrates:
“The healthy 40-year-old man who pays $350 a year for a $500,000 term policy would pay about $3,000 a year for a $500,000 universal life policy.”
The huge difference is partly because a big portion of the $3,000 is going into the investment component of the policy. Which begs the question, is cash-value life insurance a good investment?
Well, it’s certainly better than the paltry 1% or less traditional savings accounts are paying these days. As the Wall Street Journal reported in 2012, many insurers were paying 4% to 6% annual dividends, with guaranteed minimums of 2% to 4%, and you may also be able to withdraw much or all of what you put into your policy tax-free if you follow the strict rules.
If that sounds good to you, let’s take a look at where you can find the money to fund your cash-value life insurance. With just a little discipline, it may be a lot easier than you think.
Feeding your life insurance piggy bank
- The Energy Information Administration predicts that plummeting prices at the gas pump will save the average U.S. household about $550 this year. Instead of blowing it on fast food and online shopping sprees, use it to build your life insurance retirement nest egg.
- Save your loose change. Empty your pockets or your purse at the end of every day and toss the coins in a big jar. Just 50 cents a day for a year is $182.50.
- Brown bag it. Instead of spending $5 a day to buy your lunch, spend half that to make it at home. Over the course of 50 work weeks, that’s about $625 savings a year.
- Raising the deductibles on your auto and homeowners’ or renters’ insurance could save you several hundred dollars in annual premiums. Just be sure to put the money in your savings account.
- Mortgage interest rates remain at historic lows. Refinancing your mortgage could save you thousands of dollars over the life of your loan, especially if you shop around for the best deal.
- Opt for automatic payment deductions from your bank account on all your credit cards and installment payments, and you’ll never pay another $35 late fee.
- When taste and quality aren’t an issue, buy the store brands. After all, can you really tell the difference between brand-name aspirin at $5 for 100 and the drug store’s generic label for three bucks less?
- Think like your grandma. Turn off lights when you leave the room. Close the doors to room you aren’t using so you don’t waste energy dollars heating or cooling them. It may only save a few pennies, but those pennies add up.
- Shop around for the best deals on cable, Internet and mobile service. Dump the pay-for-view services you don’t really watch all that often. A little effort can save you big bucks.
- Get your extended family to agree to curtail the gift-giving for birthdays and holidays -- $25 per gift times 10 family members is $250.
- Stop smoking. Cigarettes are literally money going up in flames. Besides, life insurance companies look favorably on non-smokers.
- Develop a budget and stick to it. Pay your savings account off the top.
Shop and compare life insurance policies
A lot of people don’t buy life insurance because they dread talking to an agent. No worries. You don’t have to. You can shop for quotes and compare benefits easily online right here.
 “Ultimate guide to retirement,” http://money.cnn.com/retirement/guide/insurance_life.moneymag/index9.htm