Ways to Lower Your Life Insurance Premium

Short answer

You can often lower a life insurance premium by reducing the face amount, dropping riders you no longer need, paying annually instead of monthly, asking for a rate-class review if your health or smoking status improved, or replacing an old policy with a cheaper one while you are still healthy. Check what you give up before changing anything.

Key takeaways

Paying once a year often costs less in total than paying monthly.
Lowering your coverage or dropping riders you no longer need can cut your premium.
If you quit tobacco or your health improved, ask about a better rating class.
Whole life owners may use dividends or reduced paid-up coverage to cut costs.
Keep your current policy until any replacement is fully in force.

See what you are paying for

Your premium may cover more than the base death benefit. Look at your policy data page and your latest bill or annual statement. Many policies list separate charges for riders and a yearly policy fee. Once you see each piece, you can decide which ones you still need. Look for these items.

The base premium for your death benefit
The cost of each rider, such as accidental death or child coverage
Any yearly policy fee
How often you pay, such as monthly or once a year
Your rating class and whether you are rated as a tobacco user

Change how often you pay

Many insurers charge more in total when you pay monthly instead of once a year. The extra amount helps cover the insurer's cost of billing you more often. Switching to annual or semiannual payments can lower what you pay over a year, if your budget can handle a larger single payment. Ask your insurer for the yearly total under each option.

Adjust your coverage and riders

If your needs have shrunk, you may be able to lower your death benefit. Perhaps your mortgage is paid off or your children are grown. Many insurers let you reduce the face amount on an existing policy, though most set a minimum. A smaller death benefit means a smaller premium, and you avoid buying a new policy at your current age.

Riders are another place to save. A child term rider may no longer make sense once your children are adults, and an accidental death rider may overlap with other coverage you have. Ask your insurer which riders you can drop and what each one costs. Before you cut anything, make sure your family would still have enough protection.

Ask for a better rating class

Your premium depends partly on the rating class the insurer gave you when you applied. If you quit tobacco, lost weight or got a health condition under control, ask whether your insurer will review your rating. Many insurers want you to be tobacco-free for at least 12 months before they offer non-tobacco rates.

Some insurers do not review ratings on existing policies, and those that do may ask for new medical information. If yours will not, a new policy might offer a better rate, though it would be priced at your current age. An independent licensed agent can review your policy at no cost and tell you whether a better rating is realistic.

Options for whole life and universal life

Permanent policies give you some extra tools. If you own participating whole life, you may be able to use dividends to reduce or pay your premiums, though dividends are not guaranteed. You may also be able to stop paying premiums and switch to reduced paid-up insurance, which keeps a smaller death benefit in force for life.

Universal life usually lets you pay less within limits. Paying only the minimum can drain your cash value and cause the policy to lapse later, sometimes when you are older and need the coverage most. Before you lower a universal life payment, ask your insurer for an in-force illustration that shows how long the policy will last.

When a new policy might cost less

Sometimes the lowest cost comes from replacing your policy. That can happen if you are healthier than when you applied or you own an older universal life policy with rising costs. A new policy has drawbacks, including age-based pricing and a new contestability period. Make sure new coverage is in force before you cancel anything, so your family is never left without protection.

Frequently asked questions

Can I lower the coverage amount on my life insurance?

In many cases, yes. Many insurers let you reduce the death benefit on a term or permanent policy, which lowers your premium. Most set a minimum coverage amount, and some limit when you can make changes. On a permanent policy, a reduction may affect your cash value or trigger fees, so ask about costs and taxes first.

Does quitting smoking lower life insurance premiums?

It can. Many insurers will consider moving you to non-tobacco rates once you have been tobacco-free for a set time, often at least 12 months. You usually must ask for a review, and the insurer may require a health questionnaire or a nicotine test. If your insurer will not review your rating, a new policy may cost less.

Why did my life insurance premium go up?

A common reason is that a term policy's level premium period ended, and the policy switched to yearly rates that rise with age. Universal life policies may need higher payments when the insurer raises its cost of insurance charges or when cash value runs low. Group life through work often costs more as you move into an older age bracket.

Should I cancel my life insurance if I can no longer afford it?

Look at your other options first. You may be able to lower your coverage, drop riders, change how often you pay or use dividends or cash value. A whole life policy may convert to reduced paid-up coverage. If you cancel and later need coverage, a new policy will likely cost more because you will be older and your health may change.

Related guides

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