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Learn what goes into pricing life insurance and how to get a low cost policy to protect your family.
Life insurance provides a financial safety net that you'll potentially be paying for some decades. That’s why it’s important to understand the cost of your policy. After all, letting a policy lapse because you can’t afford it defeats the purpose of having it in the first place.
A healthy 35-year-old male can expect to pay about $327 per year on life insurance premiums. But individual costs depend on a number of factors, including the details of your policy, your health, age, hobbies and gender — these are some of the criteria used by insurance providers to give you a classification that deems how risky you are to insure.
What are the chances that you’ll die over the course of your policy? If you’re very unhealthy and more likely to die during your policy term, you’ll be charged more. If you’re in tip-top health and there’s little risk that the life insurance company will have to pay the death benefit, then you’ll get better rates.
Knowing what goes into the cost of before you get life insurance quotes can help you make the best decisions during the application process and find a policy that fits your budget.
How much life insurance you need is a two-part question: how much coverage you need (the death benefit), and how many years you need that coverage to last (the term). Both are important and affect the cost of life insurance. Policies with higher coverage amounts will cost more, as do policies that last longer.
Note that the policy length is only applicable to term life insurance. Permanent life insurance doesn’t have this limitation and costs more. More on this distinction below.
The type of life insurance you have will largely affect the cost of the policy. A term life insurance policy is the most common and most affordable; a permanent policy is more expensive but has extra perks, like an investment-style cash component.
With term insurance, you pay a monthly premium for a set amount of time. If you pass away while your policy is active or in-force, the insurance company will pay out a death benefit to your beneficiaries. A term life insurance policy is the right policy for most people. A healthy 30-year-old male can expect to pay an average cost of $26 a month for a 20-year policy with a $500,000 coverage amount.
While term insurance is typically affordable, whole life insurance has the potential to be pricey. Whole policies can be six to 10 times as expensive as a comparable term policy. This is because:
Riders are like mini contracts appended to your life insurance policy that allow for customization for individual scenarios. They often come at an additional cost that will raise your premium and as such some riders might not be worth it.
Your health status is one of the most important factors in determining your premiums. The healthier you are, the less likely you are to die, and thus cheaper to insure. During the underwriting process, you’ll have to answer some questions about your health and your family health history, and take a brief medical exam. The insurance company may also request an Attending Physician’s Statement (APS) from your doctor to get their assessment of your health as well.
Some things that might result in higher premiums include:
If you use marijuana, your insurance company might also take that into consideration or even classify you as a smoker. However it's still possible to find providers to accommodate your lifestyle and health status whether you're a smoker, former smoker, or marijuana user so it's important to shop around.
Similarly, chronic illness or pre-existing conditions also tend to warrant higher premiums, but it's possible to find life insurance coverage with the right provider.
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In most cases, the older you are, the more you’ll pay for life insurance. This is because as you age, your health generally declines and your likelihood of dying while the policy is active increases. That’s why it’s best to get coverage while you’re healthy and young.
For a healthy male aged 30 years old, a 20-year term policy purchased has a $26 monthly premium, but the same policy at 40-years old would cost $37.
Some hobbies are more dangerous than others. If you skydive or scuba dive, your insurance company may deem you a higher risk and raise your rates since there’s a higher chance they’ll have to pay out the death benefit.
Your provider might also check out your driving history. A motor vehicle report will alert them to any risky drinking and driving-related behavior, like DUIs or DWIs, which will also increase your premium.
In most cases men pay higher premiums than women, due to the fact that they engage in riskier behaviors and have a shorter life expectancy on average. However applying for life insurance during pregnancy can raise your rates depending on the trimester. In most cases you’ll find that you can get a lower premium if you postpone buying life insurance until after you give birth.
Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.
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Yes, we have to include some legalese down here. Read it larger on our legal page. Policygenius Inc. (“Policygenius”) is a licensed independent insurance broker. Policygenius does not underwrite any insurance policy described on this website. The information provided on this site has been developed by Policygenius for general informational and educational purposes. We do our best efforts to ensure that this information is up-to-date and accurate. Any insurance policy premium quotes or ranges displayed are non-binding. The final insurance policy premium for any policy is determined by the underwriting insurance company following application. Savings are estimated by comparing the highest and lowest price for a shopper in a given health class. For example: for a 30-year old non-smoker male in South Carolina with excellent health and a preferred plus health class, comparing quotes for a $500,000, 20-year term life policy, the price difference between the lowest and highest quotes is 60%. For that same shopper in New York, the price difference is 40%. Rates are subject to change and are valid as of 2/17/17.
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