How Much Does Life Insurance Cost
One of the most confusing issues for those purchasing term life insurance is knowing exactly what determines term life insurance price. This is not uncommon as anyone that is going to be paying for something that is so very important to them and their family will naturally have questions and concerns.
Most people have a great deal of confusion when it comes to insurance in general, and the price determination is just one of those points. All insurance companies use a formula to determine the price that an individual will be charged for term life insurance. While these formulas are kept secret by each individual companies, there are some key points that will most likely be common amongst them.
Never forget that insurance companies are companies. They are in business to make money, just like every other companies. The insurance company works under the idea that a customer will pay X dollar amount for a certain number of years and that amount will be more than the amount paid out of the insurance upon death.
Working under the above business model, one of the primary factors that determines price is the clients age. A younger person, say age 35, will pay into their insurance for a longer period than a person of the age of 55. While this may not always be true, it is true the majority of the time. Age is one of the primary factors in determining price.
Another rather obvious factor is the amount that the policy will pay off. A $1,000,000 policy will cost more than a $500,000 policy. The price, however, may not be an even twice as much per month for a policy that pays twice as much. This is why it is important to make sure that you are comparing several companies in your quotes.
Other factors that will affect the price of the policy are medical conditions. This falls into two different categories. Predispositions and existing conditions. Existing conditions are the easiest to understand. A client that has a heart condition is more likely to have a shorter life span than that of a client that does not. Different companies will use a different weight for these conditions, so it is important to make sure you include this information in your quote.
A predisposition means that certain conditions either run in a clients family or an immediate family member, such as the mother or father, suffer from one of these conditions. This is not true for every condition, simply ones that can be hereditary. Again, the amount of price change that comes from each of these varies by the company.
Lifestyle choices can and will affect the term life insurance price. These fall, again, into two categories. The first category are life choices that affect health directly. Smoking is one of the most common. As a smoker is more likely to die an early death, the premiums are going to be higher for those that smoke. These include some factors that people take very personally, such as body weight. Bear in mind that insurance companies are, as stated earlier, in the business to make money. The price determination process can be very clinical, it is not a personal attack in any way.
The second set of life choices that will raise or lower a premium is a bit of a hodgepodge. They are choices that directly place the client in a higher risk group. They can be either career choices or recreational and vary greatly. A career example would be a person that works as a lion tamer. While the example is a little over the top, the point is clearly illustrated. A person that five days a week, eight hours a day, spends time in a cage with a wild animal has an obvious higher risk of death than one whom does not.
The same example can be used as a recreational choice. A person who has chosen lion taming as a hobby would have a higher risk than someone who does not, but not a great a risk as a person who works as a lion tamer. This is a good place to talk for a minute about honesty. When getting your online quote, be honest. It does no one any good to get a quote based on false information. Before an actual life insurance policy is purchased, the insurance will do an investigation and their price will include these things.
While your career
choices and medical facts can be investigated by the insurance company,
other things may be harder to determine. Be honest, but do not volunteer
information to the insurance company that is not asked. Providing false
information to an insurance company is also highly illegal. Your online
quote can also be used to see the impact that some choices have on your
life. If you smoke, try two different quotes, one with smoking and one
without. You may find the difference it makes a nice incentive to change