For many people, the cost of life insurance is the determining factor in whether to purchase a policy. In our 20s, we may feel invincible, so why pay for something we don’t need? In our 30s and 40s, we may be starting a family and have mounting expenses, so who needs another one? And by our 50s, life insurance coverage just isn’t as affordable. 

The cost of life insurance is based on different factors such as your health status and age. And the advantages range from covering financial obligations to simply giving you and your loved ones peace of mind. No matter your age and health history, using Insurify will help you find the right policy with the right life insurance company at the right rate, no matter what stage of life you’re in.

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What Is a Good Life Insurance Rate?

If you are like most people, a good life insurance rate is an affordable one. Life insurance rates, or your premium payments, are determined by the life insurance company‘s underwriting. Underwriting basically evaluates the chance of loss that would trigger the policy’s payout if the application is accepted. The key factors underwriters analyze are mortality, interest, and expenses.

Mortality in life insurance reflects the insured’s risk of death. At the core of the mortality factor are statistics compiled by the National Association of Insurance Commissioners (NAIC), known as the Commissioners Standard Ordinary table (CSO). These statistics are a jumping-off point for your policy to be underwritten. Underwriters then take the information provided on your application and classify your risk.

Which Factors Affect Your Life Insurance Rate?

Factors that increase your chance of death conditionally increase insurance premiums. Non-smokers in excellent health and with no negative medical history qualify for more affordable life insurance policies. Insurers may ask applicants for a medical exam, and standard policy exclusions, such as operating an aircraft or having a hazardous occupation, may exclude you from acceptance.

Moreover, your age, gender, family medical history, and lifestyle affect the pricing of your insurance policy. The next factor in insurance premiums is interest. The more interest insurers can earn on your policy’s investment, the less premium they need to charge. And lastly, expenses are added to your premium’s calculation. This covers the costs insurers expect to incur, such as salaries and commissions.

The type of policy is also a consideration in your life insurance rate. Term life insurance is more affordable than a whole life policy, or permanent policy. Permanent life insurance lasts until the age of 120 and grows cash value, whereas term life insurance lasts for a specified period of time. If you pass away while the policy is in effect, the death benefit will be paid out. But if you outlive the term length, the policy terminates without a payout.

Underwriting Your Life Insurance Policy

Once insurers have gathered all your information for the underwriting process, underwriters use the judgment method or the numerical rating system to classify the risk and assign your premium. The judgment method uses only the information you provided and the underwriter’s judgment. 

The numerical rating system assigns values called debits for unfavorable factors and credits for favorable factors. The debits are then added together, and the credits are subtracted. The resulting number is added to 100, and this will be the number underwriters use to determine your premium. A standard risk is between 75 and 125; ratings over 500 are uninsurable risks.

After you’ve chosen the type of policy you want and the underwriters have done their job, your premiums may be higher or lower depending on how frequently you pay (monthly, quarterly, semi-annually, or annually) and the payment mode your life insurance policy requires.

Premium Payment Modes in Life Insurance

In life insurance, the recurrence of your premium payments affects the cost. It is less expensive to pay your policy annually than monthly, quarterly, or semi-annually due to administrative costs. Also, the type of policy you choose, such as an increasing term life or universal life policy, may have varying premium payments, which are flexible, increasing, or decreasing. Let’s look at different types of life insurance policies and their premium payment modes.

Universal Life

Universal life insurance policies are permanent policies with savings and investment features that allow policyholders to increase or reduce premiums or skip paying premiums altogether. Once the investment and savings feature of the policy grows cash value, it can be used to cover the premiums. These policies are designed for your changing life insurance needs over time.

Decreasing and Increasing Term Life Insurance 

A decreasing term policy is a type of life insurance designed to cover financial obligations, such as credit card debt. Premiums decrease over time as the debt is paid until your balance is zero. An increasing term policy is the opposite of a decreasing term policy. The premiums increase over time, usually to cover inflation.

Limited Payment Life and Single Premium Life

Limited payment life insurance policies are whole life policies that provide a level death benefit, but the premium payments are made to pay off the policy in 10, 15, or 20 years. Premiums may be higher toward the end of the payment period. Single premium life is a form of life insurance that is paid off in one lump sum. Both methods continue to grow cash value after premiums cease.

Modified and Graded Premium Whole Life

Modified and graded premium whole life policies both have lower premiums at the beginning of the policy period, usually within the first 5 to 10 years. After that time, the premium rate rises. The difference between them is that a modified premium policy increases once and remains level, a graded premium policy increases with a series of steps until it levels off.

Current Assumption Whole Life Insurance

Current assumption whole life insurance premiums are based on the insurer’s actual mortality, interest, and expense experience. If their actual experience is good, then premium rates are lower, and vice versa. Premium rates may change due to the redetermination process of the company’s actual experience, usually on the policy’s anniversary date.

Indeterminate Premium Whole Life

These whole life insurance policies are issued with two premium rates: a lower fixed rate and a guaranteed maximum rate. The policyholders of these types of policies pay the lower fixed rate for a period of time, then the premium increases or decreases based on the current mortality, investment earnings, and expenses. However, the premium due for one year does not go above the guaranteed maximum rate.

Equity Indexed Life Insurance

Equity indexed life insurance is permanent life insurance whose cash value is attached to an equity index. This type of policy can come in one of two forms, universal life or whole life

With the universal life form, premium payments are flexible. When it is in the form of whole life premiums are fixed.

Ordinary Whole Life and Term Life 

These two types of policies, in their basic forms, have level monthly premiums throughout the life of the policy. The premium is agreed upon by you and the insurance company and is dependent on underwriting factors and the amount of coverage, also known as the death benefit. Whole life policies are permanent coverage and more expensive than term life, which lasts for a period of time.

How Much Does a $10,000 Life Insurance Policy Cost?

Due to the low coverage amount, a $10,000 life insurance policy is classified as final expense insurance. This type of policy is a whole life policy designed to cover expenses that arise due to a policyholder’s passing, such as burial expenses. These more affordable policies are usually available to applicants over 40 and range from $20 to $200 per month, depending on your age and tobacco use.

How Much Is a $250,000 Life Insurance Policy? 

How much life insurance you purchase affects your premiums. Higher face amounts mean higher premiums. Life insurance quotes for a $250,000 life insurance policy vary due to age and health status as well as the type of policy, permanent or term. 

As previously mentioned, term life insurance is less expensive and covers a specified amount of time, usually 10, 20, or 30 years. Premiums typically range from $10 to $200 a month, depending on your age, health status, and term length.

A $250,000 whole life policy grows cash value and is more expensive than a term life policy. Rates also vary depending on your age, health, and lifestyle. Monthly premiums generally range from $20 to $200 a month and are paid for life.

Is It Better to Get 20- or 30-Year Term Life?

Whether to get a 20- or 30-year term policy ultimately depends on your life insurance needs. A 20-year term life insurance policy with the same death benefit as a 30-year term policy is more expensive because the term is shorter. A higher death benefit also means a higher premium. Carefully examine your needs when determining which is best for you and your loved ones.

With Insurify, you can compare life insurance quotes in a few short minutes with just a click of the mouse. Merely input your information, and Insurify will produce a list of quotes from top insurance companies for you to compare and choose the policy that fits your and your loved ones’ life insurance needs and budget.

FAQ: The Cost of Life Insurance

How much does life insurance cost?

The cost of life insurance varies depending on your age, health status, family medical history, and lifestyle, as well as the type of policy you choose. If you are in your 20s and in good health, with little to no family history of chronic illness, your policy’s premiums will be less expensive than if you are in your 30s, 40s, or 50s with health conditions or a family history of illness. Additionally, whole life policies are more expensive than term life policies.

Who has the best life insurance rates?

Life insurance companies use underwriting and risk classification methods to determine an applicant’s premiums. The types of information gathered for underwriting and risk classification differ from one company to the next. Using Insurify will enable you to compare quotes and choose the best rate for you. 

Can I pay my life insurance policy in one lump sum?

Yes, you can pay your life insurance policy’s premiums in one lump sum, and the policy will be paid off. Depending on the type of policy you choose, other payment mode options are available. 

Conclusion

The cost of life insurance is contingent on a range of factors that vary from individual to individual. The right premium for you is not necessarily the right premium for your neighbor, not only due to underwriting considerations but because people’s needs and budgets are diverse.

By using Insurify, you can compare quotes that best suit your needs and budget in a flash. Save time and money by comparing life insurance quotes right from your home. Insurify makes finding the right life insurance policy a breeze.

Life Insurancen The Easy Way

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Updated January 29, 2021

Aissa Martell is a licensed insurance producer in the State of New York. She is a creative writer and has been freelance writing for five years. She’s happy to share her knowledge of the insurance industry and its products.