A life hack is a tool, technique, strategy, trick, shortcut or skill that, if adopted, will make some aspect of one’s life easier, more efficient, or more pleasurable. There are numerous websites that depict all kinds of life hacks.
Although not known by the same name, life hacks have been around for a long time. Perhaps the earliest recorded life hack was in Homer’s tale of Odysseus and the Sirens. While the call of their songs was irresistible, sailors who got too close wound up shipwrecked on the rocks.
To listen to the Sirens and live to tell about it, Odysseus devised a two part solution (life hack). First, he has his crew fill their ears with wax so they couldn’t hear the Sirens. Then he had the crew tie him to the mast so he could hear the songs, but couldn’t steer the ship closer and risk disaster.
A more current example is the opportunity that electronic funds transfer (EFT) presents for a life hack. First, have paychecks direct deposited into a checking account. Then, have all recurring bills are set up to draft from the checking account on their due date. Voila. Maintenance free personal finance.
The life insurance industry was at the forefront of using EFT to pay monthly premiums. I’m not sure when it started, but I bought my first life insurance policy in the early ‘80s and it was available then. I should note that at the time I was working for a large international accounting firm and direct deposit of payroll checks was not yet available.
While I’m reasonably sure that the insurance companies introduced EFT to make it easier for the consumer to buy (thus increasing their sales), there’s no denying the fact that it was also convenient for the consumer. Convenience, however, has a price.
All life insurance policies are priced on an annual basis. While other modes are available, they all carry a surcharge. A representative sample of the available modal premiums for a $1,000 annual premium are as follows: semi-annual, $515; quarterly, $265; and monthly EFT, $87. So the total cost of policy whose premium is paid on a mode other than annual is always greater than the annual premium.
A way to get around this is with a life hack. Pay the first premium on an annual basis out of savings while simultaneously setting up a monthly EFT into a savings account. When the second annual premium comes due, the money will be available in the savings account, plus a little bit extra for your effort.
But all of this is just tweaking (life hacking). At no time should needed coverage be postponed because the annual premium isn’t available. The annual surcharge is a small price to pay for the peace of mind that comes from knowing your loved ones are provided for.