Conversations about life insurance rates aren’t exactly routine dinner table experiences, but they’re important to put on the agenda in a more private setting.
If you’re not sure how to start the process, look at what they are and how they can work for you.
How Does Life Insurance Work?
Life insurance policies protect your family by offering monies in the case of unexpected early death. If you die suddenly, the life insurance carrier will pay a certain amount to help cover funeral costs, costs of living, etc.
Insurance policies fall into three main categories: term life, whole life and universal coverage. Term life is a popular choice, because it has a beginning and end. For instance, a 20-year term life insurance policy offers 20 years of coverage. After that point, you would need to purchase another policy, if possible.
Whole life insurance is more expensive than term life, but it covers you for the rest of your life. It also allows you to invest your money, and get a return on the investment. Again, for the price of higher premiums, it can provide a nice “nest egg.” Some people add this to their retirement portfolio package.
Universal life insurance offers more flexibility, but it is also more expensive than whole or term life insurance. With a universal life insurance, your premiums and rates are based on the market. Therefore, you should carefully speak with a financial advisor before determining if universal life is the way to go.
When Should You Buy Life Insurance?
Most young professionals aren’t thinking about life insurance in their 20s, but it’s a prime time to buy because age is related to life insurance prices. Specifically, the amount you can expect to pay in annual and monthly premiums will increase the older you are when you start the term. Consequently, you want to be as young as possible to lock in the lowest rate you can get.
With each passing year, your chances of snagging low premiums start to fade. Most estimates suggest that premium rates go up around eight to 12 percent every 12 months. Therefore, a $100 monthly premium on a 20-year term life insurance policy for a 40-year-old would rise to about $110 if he waited until he was 41.
Why Does Age Matter?
Life insurance carriers look at the average expected lifespan for men and women, and then calculate their risks accordingly. This is the reason coverage is so much lower for 20-somethings than 50-somethings. The closer an individual gets to the general life expectancy, the greater the likelihood of death.
Are There Other Factors When Calculating Life Insurance Policy Rates?
Although age is the most important factor when considering and calculating life insurance premiums, smoking is almost as big. Non-smokers may be quoted rates that are half the rates for their smoking counterparts. That’s a great excuse to finally kick the smoking habit!
If you’re interested in learning more about life insurance for you or a loved one, contact your local independent insurance agent for advice. Why wait another year for ultimate peace of mind?
