Understand Term Life Insurance Premiums
Let's take a quick look at the dreaded term life insurance premium. The first take-away is that, hey...it's not that bad! Term life insurance has become incredibly affordable especially compared with other types of life insurance such as whole or variable life. In fact, prices have dropped significantly over the past decade in an increasingly competitive market. Let's dig a little deeper into what affects term life premiums.
The term life insurance premium is just a fancy insurance word for the amount of money you pay to keep a term insurance policy in effect. It's your part o f the contract with the carrier. As long as you pay your policy, the coverage will remain in effect for your desired term regardless of health. It is guaranteed renewable in this sense for a fixed period of time. Depending on the life carrier, you typically have the option of paying premium in different ways and there can be a discount to paying for longer amount such as a year versus monthly. The rates given in the quote engine are usually the monthly amount but a discount can be applied for annual payments when you go through the application process. There are various ways to pay your premium depending on the carrier that range from billings to credit card/auto deductible options.
What factors affect the term life insurance premium?
There are three main factors that drive your term life insurance premium amount. Think of a triangle with age at time of enrollment, term length, and amount of coverage. You really can't control the page part (apart from not procrastinating) but keep in mind that there is a considerable cost to waiting to purchase term life insurance. You will end up paying more in total dollars by waiting. The key then is to find the right "blend" between term length and amount of coverage. You can play around with these variables when you run your instant term life insurance quote in our free engine.
Health condition at time of enrollment
Your general health and pre-existing conditions can affect both your ability to qualify but also your pricing. Factors such as smoking, being overweight, etc can have a bearing on your pricing as the premiums are usually set up among health class such as Preferred, Standard, etc. There may be options for you even with health issues although they might be for lesser amounts and different than the one listed in the quoting engine.
For those who are frustrated with the incessant rate increases from their health insurance carriers, you'll be pleasantly surprised to find that term life premiums are fixed during the desired term length. This is why it's so important to purchase life insurance as young as possible. That fixed rate will be higher with each passing year of your life if you wait to purchase term life insurance.
Different carriers have riders available that affect your term life premium. These "riders" are essentially specific add-on benefits to your core life insurance coverage that cost extra premium. For example, you may be able to stop paying premium and keep the policy in effect if disabled. You usually pay an extra amount for each rider. This is really a question of personal preference. Our thought is to buy as much core term life protection (combination of length and amount) as possible with your available budget. An extra $10/monthly might buy you $100K more in coverage and that would be our recommendation. That being said, do not buy more than you can afford over the long haul or it defeats the purpose to lapse coverage when in financial hardship in the future due to over-insuring your life insurance needs. There's a middle ground there and that is where we recommend purchasing.
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