How do insurers determine life insurance costs?

Life insurance is an important investment, but how much does it cost? The amount you will pay for life insurance relies on a variety of different factors. People looking for a more affordable option often opt for term life insurance, since you only pay for it while you need it. The downside is that term life insurance plans end after the set term, and it can be expensive to renew once you are older. Permanent life insurance polies are more expensive but provide coverage for your entire life. By requesting a quote from Insurance Best Prices, you can compare quotes and find the best policy for your needs.

What is the Average Cost of Life Insurance?

Affordable life insurance is out there, you just need to find the right plan and provider. Insurance Best Prices can help you find the plan that meets your budget and coverage needs. Individuals who are younger and in better health receive the most favorable rates. Choosing term life insurance provides additional savings. Purchasing life insurance while you’re young and healthy will help you secure the best rates. But that doesn’t mean that you can’t afford life insurance if you are older or have a health condition. You can also reduce your coverage amount to impact your life insurance premium.

The Four Factors That Determine Life Insurance Cost

There are multiple factors a life insurance company will consider when writing your policy. It’s important to know what the main factors are, so that you can understand how your situation will impact your life insurance premiums and policy cost.

1. Type of policy you choose

The type of life insurance policy you choose will impact your life insurance premiums. Term life insurance policies are the most cost-effective. You will be able to choose the term that makes the most sense based on your age at the time of purchase. You can choose terms of 10, 15,20, 25 or 30 years. Permanent life insurance polices are the more costly option but offer certain benefits. Your policy won’t end after a certain term, which means you wouldn’t have to worry about renewing your policy for a more expensive premium or looking for an alternative option. With certain policies you can borrow against your life insurance when you need money. The two types of permanent life insurance are whole life insurance and universal life insurance.

2. Amount of coverage you desire

This one is understandable. The amount of coverage you need will impact your life insurance cost. For example, if you are looking for a $1M life insurance policy, you are going to pay more than someone who is looking for a $500k policy. The higher the coverage amount and the longer the policy, the higher the premium. The longer the policy, the more likely the insurance company will be required to pay out the benefit. At Insurance Best Prices, we can help you save by determining the right amount of coverage for your needs, so that you aren’t paying for coverage you don’t need.

3. How old you are and your gender

The price for life insurance increases as you age, because the older you are the more likely the insurance company will be required to pay out on the death benefit. The higher the risk for the insurer the higher the premium for the buyer. Each year that you wait to buy life insurance, the higher your premiums will be. Life insurance policy premiums can increase on average by eight to ten percent each year you wait. Life insurance underwriters evaluate how long you might live to determine your premiums. Since women tend to live longer than men, they often get lower life insurance rates.

4. The condition of your health and lifestyle

As we’ve discussed above, your life insurance premium is going to be based on how risky you appear to the life insurance underwriter. The more risk that the life insurance company takes to insure you, the higher your premiums will be. That is why the status of your health at the time you apply for life insurance matters. Life insurance companies can require you to complete a basic medical exam as part of the application process. If you have certain conditions like high blood pressure or high cholesterol levels, have HIV/AIDS or hepatitis, have a chronic illness, or use nicotine or recreational drugs -  you can expect to pay more for life insurance. You can also assume you will pay more if you enjoy extreme sports or hobbies. This is the case for both term life and permanent life insurance.