HOW LIFE INSURANCE IS PRICED
Age
Age is a driving factor for all insurance policies due to mortality tables.
Medical History
Medical history impacts your overall rating which can increase or decrease premiums. Some carriers have more favorable underwriting guidelines than others depending on past diagnosis. Picking the right carrier is important and can lead to large savings so it's best to be honest about any ailments or medications upfront.
Personal History
This includes but not limited to - height/weight, nicotine use, arrest history, substance abuse history, driving record, and other factors.
Gender
Gender also plays a large role - Statistics show that females live longer than males so most carriers take that into consideration.
The Amount of Coverage & Riders
The amount of death benefit coverage and rating will determine the premium. The higher the coverage, the higher the cost of insurance. Any included or additional riders such as living benefits (Critical Illness & Chronic Illness), Return of Premium, Disability, Long Term Care, Etc. will also impact the price due to early access and liquidity.
Duration of Your Coverage
The length of coverage also plays a major role as this is linked to your risk factors and age. The longer your policy coverage the more expensive the premiums as they are more likely to be paid to your family.
Term vs Permanent Life Insurance: Key Difference
Term "What if"
Permanent "When"
Permanent "When"
Term insurance is often most recognized as the simplest form of life insurance. These types of policies provide coverage for a certain numbers of years or to a certain age. Most options have certain coverage durations of 10, 20, 30, or 40 years and expire or have price increase when term ends. This coverage is most beneficial to cover life's "what if" for individuals and families. Term insurance is the most cost effective form of life insurance as the coverage expires and is no longer in force.
Permanent "When"
Permanent "When"
Permanent "When"
Permanent insurance is often more complex and sometimes provides more flexibility than term insurance. These policies and products are typically Whole Life, Index Universal Life, and Universal Life. They are more expensive than term insurance as most are intended to last until "when" you pass away. Permanent policies usually come with liquidity and access to the policy in forms of cash value or riders. This can lead to more complex designs as product intention and funding can be different than term.