Rent insurance on the best terms. The longer your policy runs, the better the discount. If you're in a low-risk category, get a ten-year policy. If you're in a high-risk category, look for a two- to five-year policy. If you're buying your home, consider paying a premium to transfer the life insurance policy to the buyer. The cost to transfer your policy is usually lower than the cost to issue a new policy. Even if you don't want to buy a policy in the first place, you can sell it for cash. And that cash can be used to buy a new policy that's right for you. One of the biggest reasons you pay more for term insurance is that you're younger. So why not get a policy with a higher payment but a lower death benefit? For instance, an individual in his thirties might be better off with a $100,000 payment at 20 percent interest. For the same cost, a sixty-year-old would receive a $50,000 death benefit. In most cases, the premiums will be lower than a $100,000 policy for the younger person. With the longer life expectancy, the policyholder could get a very nice windfall by selling the policy to a life insurance company. .jpg) A few years ago, I had a prospect who turned out to be a great client. It was a young man who had an insurable interest in his parents and decided to buy life insurance on them. What he didn't count on was that he would have a better deal by buying the policy from his parents and transferring it. Because he didn't make any money for five years, he had to pay 5 percent interest on the death benefit. I thought he'd never do it, but when he saw that he could use the policy to get the money he needed, he called me from an offshore tax haven and asked how I could do it. Of course, the rate of interest on his transferred policy was considerably lower than the 20 percent interest he'd have to pay on a policy he bought directly from an insurance company. It's not unusual for folks to do this. Young people can't afford to pay 20 percent interest on a 20-year policy, but they can afford to pay 20 percent interest on a 25-year policy. If the insurer agrees to let them buy the policy at their own price, and if their life expectancy is reasonable, the young person can get a very nice windfall. .jpg) Before you decide to buy term insurance, make sure you're the owner of the policy and that the agent selling it has all the powers and privileges of a licensed life insurance agent. Also make sure that the company selling you the policy will honor the policy if you die before the term is up. Don't assume that buying a policy means that you're legally insured; read your policy. Paying the Premium So you've decided you want term insurance. Now you have to get a good price and be willing to sign on the dotted line. Most people, when they hear the term premium, freak out and say that they don't have that kind of money. Well, yes you do. And no, you don't have to borrow money from Uncle Sam. And there's no minimum monthly payment. You don't have to make any payment until you've taken the policy out. If you're buying a policy that has a surrender charge — a penalty for canceling it early — you can get a lower premium if you sign a temporary agreement to pay the surrender charge. You can get another tax advantage if you buy the policy through an agent in your state who is licensed to sell insurance. You'll pay your first premium when you decide to buy the insurance. Just remember that the insurance company, in addition to your first premium, charges you interest for lending you the money to pay the premium. The insurance company also gives you a refundable deposit called a surrender charge. That means you can get a lower premium if you agree to pay the first portion of the premium and the policyholder's cost of insurance within a certain time. If you're buying term insurance in the mail, expect to pay more for the initial insurance and for the first premium, which you pay when you order the policy. When buying insurance in the mail, the agent makes the sale. You aren't able to cancel it, nor are you able to get a lower premium without making a surrender charge. In most cases, you can't get out of the policy at all. .jpg) The more complicated your situation, the more confusing a term life insurance policy can be. You need to read the policy very carefully. If you aren't positive about your intentions, take it back. Here's what happened to one client who took out a two-year policy on his father's life. In his own words, he said that he thought he was getting two years' insurance coverage at a good rate and that he didn't have to read the policy or pay any more premiums. Well, what he actually received was a 10-year policy with a premium that cost $3,000 more than a standard policy would have cost. (Keep in mind that he could have purchased an annual policy that would have cost $12,000 less than the cost of the new term insurance policy.) Before he realized what he'd bought, he had to pay an additional $6,000 because he didn't make the first payment on time. He found himself covered for 20 years at a cost of $6,000 more than he should have paid. How stupid was he? Not only did he buy a 10-year policy on his father's life, but he did it while he was away on a business trip. When the agent called him on his hotel room phone to remind him to make a payment, the son was so disconcerted that he didn't know what the heck he was buying. He had to cancel the policy. In his mind, he had nothing to lose. By canceling the policy, he would have his money back. He thought the insurance company should refund the money and cancel his policy. What he didn't understand is that in many states, the insurance company can apply your refundable deposit — the initial premium payment — to another policy and issue a new policy without giving you a refund. So why bother to pay off your outstanding loan balance if you're not going to be able to get the money back? Unfortunately, this is another example of how an uninformed decision to buy insurance can affect your financial future. .jpg) If you end up owing money on a policy you're selling, talk with the agent who sold you the policy. He may be willing to give you a lower price. Or he may be willing to work out a deal that requires you to make payments over time. Finding Out What's Needed When you have decided to buy insurance, find out what you have to do. If you're buying a whole life insurance policy, your agent should go over the entire process with you. But if you're only buying term insurance or an insurance policy that has limited coverage, you're on your own. Many companies still don't do this. When I had a client buy a term life policy, the agent knew that he had to go through another agent to fill out the forms and be insured. When I asked her about it, the agent said that's the only way she knows how to do it. But in today's day and age, if the client can't do it, the agent can do it over the phone. You don't have to go to a physical agent to sign your policy. And you don't have to leave your home. All you have to do is fill out a form and sign it. Your agent should be able to explain what's needed. If not, ask for another agent. For a policy to be binding, it has to be properly signed by the agent and the policyholder. It has to be properly witnessed. And it has to be properly witnessed by a licensed notary public in your state, or someone duly authorized by your state's department of insurance. You may also want to fill out an application that you can take home. Make sure the agent can send it to the insurance company for you. That way, if you find a lower price by talking with another agent, you don't have to start all over again. Insurance Companies Aren't All Bad I'm in the business of helping people buy insurance because I understand the problems you can run into when you're buying insurance. If you can't afford insurance, I don't want to sell you anything. Here's a secret: I love life insurance. I have three pieces of property-related life insurance policies. In addition to the whole life policy on my life that I got when I was 30, I have a whole life policy on my wife, a whole life policy on my house, and a $50,000 mortgage life insurance policy on my house. And that's just the three policies I have on my life. Because I'm so interested in life insurance, I'm constantly looking for ways to lower my cost of insurance and ways to increase the benefits. But you'll pay more for life insurance if you buy it in the mail. You'll pay more for any insurance if you allow someone else to do the buying for you. And you'll pay more if you buy insurance over the phone. How can a company afford to charge so much? The answer: Insurance companies aren't in business to help