The type of life insurance policy you choose will determine how much the policy costs while you are alive and how much your loved ones are paid out when you eventually pass away. There are two major types of life insurance — term and whole. If you are considering a term life insurance policy, here is some information you can use to determine if one of these plans is the right fit for you and your family.
How does term life insurance work?
Term life insurance offers coverage for a specific amount of time. If you pass away during the term that the coverage specifies, your beneficiaries will be paid out by the policy. On average, term life insurance policies offer a coverage period ranging from 20 to 30 years.
Term life insurance vs whole life insurance
While term life insurance policies cover a set period, whole life insurance policies offer coverage throughout your entire lifetime. Some individuals prefer whole life insurance policies because they offer security and peace of mind that your income will definitely be replaced if you die, but others feel the long term investment is not ideal in many cases.
This is mostly due to the fact that whole life insurance policies are typically more expensive than term life policies. One argument against whole life insurance is that the additional money you spend on a whole life insurance policy could be used to make investments that allow you more flexibility and potential for growth. An insurance agent will be able to help you determine whether whole or term life insurance is the right option for you.
Factors that affect term life insurance costs
Term life insurance policies require you to pay a monthly premium for a set period of time. For most people, term life insurance will have reasonably low premiums and potentially high coverage amounts. Though, there are several factors that will affect the rates insurance companies offer you. They include:
- Health status: Insurance companies will ask you questions about your current health status and family health history and may require you to take a medical exam. Through their findings, they will calculate rates that they are comfortable insuring you for. Your health status will impact your premium rates significantly, as healthy people are less likely to die, ultimately making them cheaper to insure.
- Age: As you grow older, the cost of a new life insurance policy will go up. If you opt to sign up for a term life insurance policy when you are young, you are locked in at that initial rate. Therefore, the earlier you enroll in an insurance policy the more money you will save in the long term.
- How you spend your time: The things you do in your daily life may affect the rates you pay for term life insurance. If you have a dangerous job or risky hobby, insurance companies may decide to include a flat additional fee in your policy. This fee will be a set amount that is connected to your coverage amount. For example, if you are a scuba diver with high occupational risk, insurance companies may demand an additional $3 per $1,000 dollars of coverage. In this scenario, a $100,000 policy would end up costing you an additional $300 annually. If you frequently engage in risky activities it is important to be honest and upfront about them when purchasing life insurance, because if your carrier finds out that you lied during the application process it may invalidate your coverage meaning your death benefits will not be paid out to beneficiaries.
- Gender: When insurance companies are calculating your rates, they are evaluating how long you will live. Because women tend to live longer than men according to many studies, your gender will play some role in determining your term life insurance rates. In general, a woman will typically be offered lower life insurance premiums than men.
How much term life insurance should you get?
Many experts state that you should aim to have a term life insurance policy that covers 8-12 times your annual income. This creates a large enough cushion for your beneficiaries to remain stable and replace your income over time if you pass away.
Why Get Term Life Insurance
Term life insurance policies will give you peace of mind that your loved ones will be taken care of after you pass. Don’t gamble with the financial security of your family, get in touch with the insurance experts at Acropolis Insurance now to find a term life insurance policy that fits your long term needs.
