Lesson 2: How to Save $300 a Month on Insurance

Everyone knows life insurance is important. After all, there’s no better way to love your family than to ensure they’ll be taken care of if something happens to you.

What most folks don’t know is life insurance doesn’t have to cost you an arm and a leg. In fact, research shows 64% of policyholders pay thousands more for life insurance than they have to each year.

What are they doing wrong? They’re throwing money into a cash-value insurance policy. 

People flock to cash-value policies because they package insurance and savings together. Yet it’s one of the worst financial products out there. The investment returns are very low, and your money is eaten away by big fees and commissions. Plus, if something happens to you, your family only gets the face value of your policy. 

A Better and Less Expensive Plan for the Future

Insurance doesn’t have to cost so much. Term life insurance is far less expensive, and you can invest the leftover money in growth stock mutual funds that you control. Here’s a good example.

Catherine is a healthy, working mom in her mid-30s. She earns $40,000 a year and wants a $450,000 policy to replace her income for her family. 

  • Catherine could get a 30-year term life insurance policy for as little as $32 a month.
  • Whole life insurance, a common type of cash-value insurance, would cost her about $400 a month.

That’s $368 more each month—and a $132,000 difference over 30 years! Imagine what you could do with just $300 extra a month:

  • Get rid of debt. If you owe $7,000 on a credit card at 17% interest and pay $200 a month, you’d pay it off in three and a half years. If you bump your payment up to $500, that debt would be gone in less than nine months, saving you nearly $2,000 in interest. 
  • Save for retirement. Invest $300 a month into good growth stock mutual funds, and you could retire with $650,000–970,000 in 30 years.
  • Pay off your home mortgage. At 4% interest, you could pay off a $200,000, 30-year mortgage in 19 years—and save more than $58,000 in the process—by applying an extra $300 to your monthly payment.

Make the Switch to Save

Term life gives you the best mix of cost, coverage and control. So trade in that whole life policy for term life insurance! You can pick the right amount to take care of your family for a lower monthly price. Since you pay less, you can direct that leftover money toward investing or paying off debt. 

Are you ready to put money back into your budget? Ask an insurance agent you trust to see how much you can save by switching to term life insurance. Then put those extra dollars to work for you!