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Term life insurance is the most affordable option when it comes to protecting your loved ones should the unexpected happen. The exact pricing varies depending upon the individual, the product, and the amount of coverage you choose. Everyone’s situation is unique so a policy that works for some may not be the best choice for another. Two people with the same type of policy may also pay different rates depending upon the individual’s age, health, and lifestyle.
5 Factors that Affect Life Insurance Costs
- Age – The younger you are, the cheaper life insurance is because you most likely won’t be dying soon. If you are 70 years old and looking to get life insurance, the insurance carriers see that as a high risk so you pay more.
- Health – Your height and weight, and smoking status, as well as chronic conditions such as diabetes, cancer, heart disease, and asthma all affect the cost.
- Gender – Women statistically live longer which means they would be paying premiums longer so life insurance costs tend to be cheaper.
- Family History – Your health could be clean as a whistle, but if your entire immediate family was diagnosed with heart disease at age 50 then you most likely will be paying more. The insurance carrier considers the risk that you too may develop heart disease.
- Hobbies – Scuba diving, skydiving, private aviation, world travel, any recreational activities that could be considered risky affect life insurance costs.
Term Life Insurance Cost
As its name states, term insurance only provides coverage for a specific period of time. You can purchase term insurance for 10, 15, 20, 25, or 30 years, however long you need depending on your situation. It’s the cheapest form of life insurance because it is only a defined coverage period, not your entire life, and does not have a cash-value aspect. If you are healthy and relatively young (20s through 50s) you can buy thousands of dollars of life insurance coverage for under a dollar a day.
Example: You’re 30 years old and you pay $15 a month for $100,000 worth of coverage that will last for a 30-year term to protect your family from financial hardship if something happened to you.
If you should die within the term, the entire coverage amount goes to your beneficiaries. When your term ends, your coverage ends. If you decide to extend or renew your policy, you have the option but your premiums will be higher since you are older and probably not as healthy. There is also a chance you may be deemed uninsurable and denied additional coverage.
Before your term length ends, you have the option of converting it to a permanent life insurance policy. A clause is written into most term insurance contracts that allows you to make that conversion. Term is ideal for those who need coverage for a specific period of time, but if your situation changes and you prefer coverage for your lifetime converting is an option.
Example: You purchase a 20-year term policy with a 10-year conversion clause. This means if you are nine years into your contract and want to convert, you are free to do so without having to go through additional medical exams and would be able to obtain the same coverage at a lower premium than that of a completely new policy.
Return of Premium Term Life Insurance Cost
Return of premium term life insurance (ROP) is a term insurance policy in which the insurance carrier returns all the premiums you paid if you outlive the term length. Your beneficiaries still receive the death benefit should you die during the term.
Your monthly or annual premiums are fixed and do not change as you get older or if your health changes. ROP premiums are higher than traditional term because the insurance carrier is paying out whether you live or die, pending you pay your premiums keeping the policy in force.
Example: You’re 30 years old and purchase a 30-year ROP policy. You will pay $35 monthly or $390 annually for $100,000 worth of coverage. Should you die at age 40, your beneficiaries receive the $100,000 death benefit. Should the 30-year term policy end and you are still living, the insurance carrier gives you back the entire premium amount you paid tax-free ($12,600 if you paid monthly, $11,700 if you paid annually.)
There are many factors to consider when shopping for life insurance. It is a very personal decision and should be determined thoughtfully. No one ever anticipates needing to use life insurance, but the unexpected happens. Be prepared and get a free and anonymous term life insurance quote today.
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