Affordable Life Insurance for Low-Income Families

If you're on a low income, you may believe life insurance is beyond your budget. Fortunately, this often isn't the case. Many companies offer affordable term life insurance for low-income families, and understanding your options can help you find the right provider. 

How Much Does Life Insurance for Low-Income Families Cost?

Life insurance for low-income families works the same as regular life insurance.

A common coverage amount you can purchase is $100,000, meaning that your beneficiaries receive that amount as a lump sum if you die during the policy's term. 

On average, a 10-year term life insurance policy with a $100,000 coverage amount costs around $11.09 per month, rising to $12.59 for a 20-year term. The table below shows the average monthly premiums charged by leading American providers for a $100,000, 10-year term policy:

A 10-year term may not be long enough to suit your needs, especially if you have young children. You may also need a higher coverage amount to cover your lost income if you pass away. Increasing your term or coverage amount will increase your monthly premiums.

How Do I Find the Cheapest Life Insurance for Low-Income Families?

If you've received an eye-watering life insurance quote, there are several things you can do to bring the cost down. Firstly, it's worth using a price comparison website to compare similar policies from various providers to see which offers the lowest monthly premiums.

Once you've found an affordable quote, it's a good idea to snap it up as quickly as possible. Average premium payments increase with each year of age, so buying insurance while you're young and as healthy as possible typically leads to cost savings. 

Understanding how insurers determine the risk of insuring you can also help you reduce your monthly premiums. Generally, insurers consider your lifestyle when deciding how much to charge, as factors like being obese or a smoker can increase the chances you might pass away during the benefit period. Giving up smoking and losing weight if you're overweight or obese can help you get cheaper rates. 

It's also a good idea to ask your employer if they offer group life insurance policies. Employer-provided life insurance usually costs significantly less than purchasing similar coverage as an individual.

How Do I Get Free Life Insurance for Low-Income Families?

Some employers provide free life insurance for their employees, especially in the healthcare sector. While it's important to check that the coverage amount meets your family's needs, any coverage is better than no coverage if you can't afford individual insurance. If you don't qualify through your workplace, some companies offer free life insurance for low-income families.

For example, MassMutual's LifeBridge program provides free 10-year life insurance policies with a $50,000 coverage amount. Only one parent in a household can sign up for the program. It aims to cover educational expenses for children if their insured parent passes away during the policy term.

If the insured person dies, the payout transfers to a trust. The trust then pays educational expenses and any associated costs, such as the cost of books or campus accommodation, on the children's behalf. Children must use the funds within 10 years or before age 35, whichever comes later. 

To qualify for free LifeBridge coverage, you must:

• Be aged 24 to 42
• Have one or more minor children, which includes children you have legal guardianship over
• Be in full or part-time employment with a total family income between $10,000 and $40,000
• Meet MassMutual's health underwriting criteria

Which Companies Offer the Best Life Insurance for Low-Income Families?

Various companies offer affordable life insurance for low-income families, but it's important to check that any company you use is financially healthy. While it may be cheaper to buy life insurance from companies with lower ratings, you run the risk of the company going out of business. 

One of the easiest ways to check a company's financial strength is to check its AM Best rating. AM Best is an independent credit rating agency that assesses the financial health of various companies, including life insurance companies. A++ is the best rating, followed by A+, A and so on. Any rating below B+ means a company is financially vulnerable. The top-ranked companies include:

• MassMutual (A++)
• Haven Life (A++)
• New York Life (A++)
• Nationwide (A+)
• Protective (A+)
• Legal & General (A+)
• Mutual of Omaha (A+)
• Lincoln Financial Group (A+)
• Prudential (A+)
• Transamerica (A)

Which Companies Offer the Cheapest Life Insurance for Low-Income Families?

While your age, health and coverage all affect how much you'll pay for life insurance, some companies cater better to certain groups than others. According to Bankrate, Ladder Life is one of the cheapest term life insurance providers, and you won't need to undergo a medical exam for policies with coverage amounts lower than $3 million. 

However, that doesn't mean that Ladder Life is the cheapest insurer in every circumstance. It's worth comparing quotes from multiple providers before making a decision. 

How Much Life Insurance Do Low-Income Families Need?

How much life insurance you need depends on your family's circumstances. Generally, it's a good idea to purchase insurance with a coverage amount worth 10 times your annual salary. For example, a policy offering a $200,000 payout might be adequate for someone earning $20k per year. 

However, consider how long you need the death benefit to cover your family's expenses. For example, if you have very young children, you may need to provide for them for the next 15 years. In this case, it may be better to multiply your salary by 15 to determine your coverage amount. 

It's also worth considering your debts when figuring out how much coverage you need. For example, you may wish to add the value of your outstanding mortgage, credit card debts or loans so that your family won't have to shoulder the repayments if you pass away. Many people also choose a higher coverage amount to reflect the potential costs of putting children through college. 

All that being said, don't be put off if the quotes are unaffordable after calculating your ideal coverage amount. If you simply can't afford the premiums, it's better to purchase insurance with a lower coverage amount than leave yourself completely uninsured. 

What's the Cheapest Type of Insurance for Low-Income Families?

If you're on a budget, term life insurance is always the cheapest option. However, permanent life insurance accumulates cash value, making it a good option for people who want long-term coverage with larger budgets. Unfortunately, there are no free permanent life insurance products available, and most employers don't offer group permanent life insurance.