4.8out of 3,000+ reviews
What is a Life Insurance Premium?
- Personalized quotes in 5 minutes or less
- No signup required
If you feel like you’re learning a new language any time you shop for insurance, you’re not alone.
Whether you’ve purchased a life insurance policy before or you’re just starting out, navigating insurance lingo is no easy feat. There are many important terms to learn, from beneficiaries to underwriting …where to start?
First and foremost, you’ll want to understand the term premium . In short, your premium is the amount of money you pay the insurance company for your policy. Understanding how premiums work and what you can afford is key when it comes to getting the amount of coverage you need without jeopardizing your budget.
If you feel you already have a solid grasp on how life insurance works, but want to avoid filling out multiple applications, quote comparison sites like Insurify allow you to answer a few questions online and compare several life insurance quotes all in one place. You’ll be able to compare insurance products and coverage amounts that fit your needs…and find a life insurance premium that works for you, at no cost or commitment.
As mentioned above, a life insurance premium is what you pay for coverage. Typically, people make monthly premium payments, but it is possible to pay annually or quarterly as well. Monthly premiums are most common, though, so don’t be surprised if your life insurance company doesn’t offer annual or quarterly payment options. What the insurance provider agrees to pay out to your beneficiaries in the case of your passing is called a death benefit . In general, the larger the death benefit, the more expensive the premium.
When purchasing life insurance, a key part of the process is designating your beneficiaries . Beneficiaries are typically family members, but can also be your friends or business partners. Because your beneficiaries are the people closest to you, it’s important to a) purchase a life insurance policy that provides sufficient coverage and b) always pay your premiums. If there’s any lapse in your premium payments, your loved ones won’t be covered and you will have to reapply for a new policy. Given that life insurance premiums factor in your age, being older means you would likely end up with a more expensive policy.
Everyone’s life insurance needs are unique, so there are a handful of different types of insurance to choose from. Younger parents with kids and a mortgage will have very different needs than a 60-year-old with a sizeable retirement account. As life circumstances evolve, you can change your life insurance policy to match. So, you can purchase a term life policy to start and then switch to a whole life insurance policy if and when the need arises. However, it’s wise to keep the same policy for as long as you can because life insurance rates are typically higher the older you get.
The various types of life insurance are:
When an insurance company calculates your life insurance premium, what they are really doing is calculating your risk level. If you die before your term is up, the provider ends up having to pay out the death benefit (which is often a lot of money in the form of a lump sum) to your beneficiaries. So, if you are sick or older, you are a riskier customer because the chance that you might die while insured, and therefore the risk that they have to pay out the death benefit, is higher.
The purpose of life insurance applications and medical exams are to assess your health, and therefore risk, to the provider. The higher the risk you pose, the more expensive of a premium you will have to pay. Conversely, if you are a non-smoker in excellent health, you might be offered lower rates.
When applying for life insurance, be prepared to answer questions or undergo assessments regarding your health history, prescriptions, family medical history, blood pressure, and other lifestyle factors, such as tobacco use and exercise habits. If you currently smoke, quitting a number of years before you apply for life insurance will help you qualify for lower rates.
Other factors besides age and lifestyle definitely influence the cost, such as the current state of their insured population and the economy, but those are out of your control. So, to secure the best rates, apply while you are young, and do your best to stay healthy.
When you purchase a life policy, whether it be term insurance or whole insurance, you commit to paying a certain premium for a certain amount of time. In the case of a term policy, that could be a 20-year term or a 30-year term. With a whole life policy, that “term” is your life.
Some types of policies allow for some premium flexibility, but generally, premiums are fixed. Because of this, your existing premium will not go up as you age. However, if you apply for a new policy after one ends or lapsing on your existing one, you are likely to get hit with increased premiums, at least partially due to your more advanced age.
If you are young and considering buying a life insurance policy, you will be able to save money in the long run by purchasing one early in life. Doing so will allow you to get a low premium for the next 20-30 years (or whatever you need). If you wait, your age will lead to higher premiums.
If you itemize your tax deductions every year, you might be wondering if you can deduct your life insurance premium. Unfortunately, this is not the case. Though you can deduct your mortgage interest and charitable giving, your life insurance premiums are not tax deductible.
On the upside, though, if you passed away, your beneficiaries do not have to pay taxes on the death benefit payout. Death benefits are known for being tax-free and coming without strings.
Now that you have a general understanding of how life insurance premiums work, you can get started comparing quotes online.
Insurify’s free life insurance quote comparison platform allows you to get quotes from multiple providers in minutes, so it’s an easy way to do some quick research. Even if you don’t plan on buying a policy immediately, you can save your information and return later or bring your findings to an insurance agent. But remember, if you’re currently young and healthy, now might be just the time to buy a policy and lock in a great rate.
The car insurance quotes displayed are based on an analysis of Insurify’s database of over 40 million quotes from 500 ZIP codes nationwide. To obtain representative rates, Insurify’s data science team performs frequent comprehensive analyses of the factors car insurance providers weigh to calculate rates including driver demographics, driving record, credit score, desired coverage level, and more.
Insurify’s analysis also incorporates the Insurify Composite Score (ICS) assigned to each insurance provider. The ICS is a proprietary rating that weighs multiple factors reflecting the quality, reliability, and health of an insurance company. Ratings used to calculate the ICS include Financial Strength Ratings from A.M. Best, Standard & Poor’s, Moody’s, and Fitch; J.D. Power ratings; Consumer Reports customer satisfaction surveys and customer complaints; mobile app reviews; and user-generated company reviews.
With the above insights and ranking methods, Insurify is able to offer car insurance shoppers insight into how various insurance providers compare to one another in terms of both cost and quality. Note, actual quotes will vary based on unique attributes including the policyholder’s driver history and their garaging address.