Low Cost Term Life Insurance
There are various types of life insurance products which would include permanent life, universal life and term life insurance and of the three term life insurance is the least expensive. Even so, it may be necessary to find a term life insurance policy that is as inexpensive as possible while still providing the needed coverage. No one wants to think of his or her own death, but when there are others depending on us for financial stability, life insurance becomes a necessary commodity. Whether you have dependents you need to provide for or you simply want to provide an extra nest egg for those you leave behind, term life insurance can offer that peace of mind. If you are looking for low cost term life insurance there are several factors that can affect the premiums.
Factors that Affect Cost
The easiest way to understand why insurance premiums vary from person to person is to see it from the perspective of the underwriter. First of all, insurance companies are in business to make money – that’s basic economics 101. Knowing this, you will see that the greater risk the insurance company takes on, the more they will charge you for a policy. Remember, the longer you live and continue making payments, the greater their chances are of investing that money to yield a profitable return.
Therefore, a person in his or her 30’s is less likely to die within a few years than a person who is in his or her 50’s. Age then is one of the greatest factors that affect cost. On a par with age is the state of a person’s health. Many life insurance companies require a thorough physical examination prior to writing a policy. Factors such as smoking and diagnosed diseases and/or other health related conditions can also affect price as can alcoholism or drug abuse. In some cases the individual may even be refused insurance.
Types of Term Life Insurance That Affect Cost
There are actually several types of term life insurance policies that are priced according to the benefits they offer. While some term life insurance policies are renewed annually, this may not be the best option for obtaining low cost insurance because the premiums will usually increase year to year as you age. It is possible to lock in lower rates with a ‘level premium policy’ that stays the same for the specified number of years it was purchased for. Next would be the ‘annual renewable term life policy’ that also has a specified term but the rates go up each year.
For individuals with some amount of confidence they will outlive the policy, ‘return of premium’ insurance is available. If you can find this type of policy, it enables you to specify a term and if you outlive that time period you will get your premiums back at the end of the term. Unfortunately, premiums for this type of policy are much higher than the previous types. Simplified issue term life insurance (also called guaranteed issue or quick issue) will not require a medical exam but the premiums are much, much higher. This is the type of policy a person would purchase if they couldn’t find a life insurance policy because of medical history, for example. One thing to be aware of with this type of term life insurance is that there is a waiting period up to several years before full benefits would be paid in the event of your death.
If you are looking for a low cost term life insurance policy, then the conventional term life insurance policy would provide the lowest premiums. Although you will need to take a physical exam 99.9% of the time with this type of term life insurance, the premiums will be as low as possible. Also, it is wise to compare rates from several insurance companies because the cost of insurance will vary from company to company.