Top Investor Traps (10 of 10) Cut Taxes with Early Mortgage Payment

7 Ways to Save on Life Insurance

1. Don't buy life insurance if you don't need it. The purpose of life insurance is to replace your income if you die before accumulating sufficient assets to make life insurance unnecessary. So, if you have someone depending on you to earn a certain amount of income during a period of time, life insurance is the way to go. On the other hand, if you are single with no dependents or retired and living on investments or retirement income, you probably do not need life insurance.

2. Buy cheap term life insurance. There are two kinds of policies: Term and whole life (or permanent or cash value). Term is pure insurance for a set number of years, 10, 15, 20, or 30 and it only pays a death benefit. Whole life, on the other hand, may provide interest and dividends. Since there are no dividends or interest involved, term insurance is generally less expensive than whole life.

3. Get low cost group insurance through your employer. Some employers offer free life insurance as an employee benefit. In some cases, the employer may offer a designated amount free and the employee has the option of purchasing additional coverage. Since this is group coverage, the premiums are usually real low and it's a good deal for the employee.

4. Check your credit score before applying. If there are problems, clear them up before applying for insurance. Otherwise, you could wind up either being denied coverage or charged a higher premium.

5. Quit smoking. In addition to saving $1800 per year (a pack per day at $5/pack x 365 days), you will also save on life insurance premiums. Most companies charge twice as much to insure a smoker as they do a nonsmoker.

6. Make fewer premium payments. The fewer premium payments you make in a year, the lower your annual premium. Some companies add as much as 20% to the annual premium if you make monthly payments. You can reduce the total premium by paying quarterly, semiannually or annually.

7. Get free life insurance quotes. There are over 1500 life insurance companies. Premiums vary by hundreds of dollars for the same amount of coverage. For example, for $100,000 worth of term life insurance for a 35-year-old male, I recently found annual premiums that ranged from $886 to $2194.