I don’t know about you, but I have spent an evening with a life insurance salesman, and I have to agree with Woody. The salesman pitched me a bewildering number of choices to part me from my hard earned money, and talked and talked. That was several years before I became a life insurance agent and learned the tricks of the trade, before I knew the strategy of only buying the least expensive term life insurance policy from a company rated “A” or better.

There are numerous variations of life insurance policies, but they all fall into two basic categories: term life insurance and cash value life insurance. Cash value life insurance comes in several flavors: whole life, universal life, variable life, and variable universal life.

While cash value policies can be used to achieve multiple goals in your financial plan, the problem is that they don’t do it well. And one could achieve similar goals more effectively and profitably with better investments. That’s because cash value life insurance is not a good investment vehicle, and it should never be considered as an investment. For that reason, the best value is a term life policy. It’s pure protection at a reasonable price.

Choosing a term life insurance policy is simple. Once you decide on the death benefit amount that you need, and the length of time that you want coverage, choose the policy with the lowest premium from a company that is rated “A” or better. The ratings are given by insurance-rating companies, and are meant to give you some idea of the financial soundness of the insurance company you are considering. A rating of “A” or better is an indication that the insurance company is financially strong.

Life insurance salesman will often quote you the lowest rate in order to get you to complete an application with them. One agent may accurately quote you a standard rate for the same insurance company that another agent quoted you a preferred plus rate just to get you to complete the application. Your actual rate will be based on the underwriting criteria of the life insurance company you choose regardless of what any agent quotes you.

You cannot get a lower cost term life insurance policy from the same company by pitting two or more agents against each other. Each company has set rates based on their underwriting criteria. If two agents quote you different rates for the same amount and term of coverage from the same life insurance company, it’s because one of them is not properly qualifying you for the appropriate rate. You may be tempted to go with the lower rate, but you might complete an application only to find out later that you’ve wasted your time.

When I got my first life insurance policy that happened to me. My agent quoted me a preferred rate that sounded appealing to get me to complete an application with her, but after submitting my application the underwriter at the life insurance company offered me a standard rate that was substantially higher. Not knowing the strategies I know today, I foolishly lowered the coverage amount and shortened the policy term to get the monthly payment lower.

Different agents represent different life insurance companies, and some agents are better (honest) at qualifying you for an accurate rate. To get the best rate on your life insurance policy, get several agents to provide you with quotes accurately based on the underwriting criteria of the companies they represent. You want to choose from the lowest *accurate* rates you can find, not the lowest rates you may not qualify to receive.

I received the standard rate on my life insurance policy simply because my father had a heart attack before the age of 50. It didn’t matter that I was perfectly healthy! However, if I had used this strategy I would have found another agent that would have shown me another top-rated company willing to offer me a preferred rate because my father was still alive, which could have saved me hundreds of dollars and allowed me to purchase more protection for my family.

The best value for the lowest cost is a level premium term life insurance policy. This type of policy will allow you to purchase an amount of coverage at a fixed premium for 5, 10, 15, 20 or 30 years (the term). The greater the term, the greater the risk for the insurance company; therefore, the greater the term, the higher the premium.

Select the shortest term that provides adequate coverage, thereby saving hundreds of dollars in premiums that would otherwise be potentially wasted on an unnecessarily long term.

How do you decide the best term? That depends on your unique situation.

For example, let’s assume that you are a 32 year old male in excellent health and able to purchase $500,000.00 of coverage for 10 years at $13.56 per month, for 20 years at $20.56 per month, and for 30 years at $36.31 per month. Two factors to consider in choosing the best term in that situation would be present affordability, and future needs.

* Present Affordability – If paying $36.31 per month for a 30 year term is going to be difficult on your budget, but you have determined that $500,000.00 of coverage is the minimum that you require, choosing a ten year term for $13.56 might be your best choice to keep a policy affordable without lowering the death benefit amount to get a longer term.

* Future Needs – It is difficult, if not impossible, to predict the future. However, it is reasonable to predict that dependent children may become less dependent one day, that dependent parents will eventually die, and hopefully that one’s wealth will increase. Those factors reduce the potential for financial hardship on others if you die, thus decrease your need for life insurance coverage over time. Will you need $500,000.00 worth of coverage 20-30 years from now?

Consider that if you stop making payments after 10 years on the 30 year term at $36.31 per month due to affordability or changing needs, and your policy lapses, you would have wasted $2,730.00 in premium payments over the 10 years you paid by using a 30 year term to accomplish what you could have accomplished by starting with a 10 year term.