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Definition of an Insurance Premium
Insurance premiums are the monthly or annual payments you make to an insurance company for life insurance coverage. Different kinds of life insurance carry fixed or adjustable premiums, depending on what type of policy you have in place.
Term Life Premiums vs Whole Life Premiums
Term Life Insurance is temporary life insurance coverage that expires after a certain amount of time (usually between five and 30 years). Because term life coverage is temporary, term life policies are less expensive than permanent policies.
Typically, when your policy's term expires, you have the option to renew the policy at an increased premium. If you purchase a convertible term life policy, you can convert the policy to a permanent life policy.
Permanent Life Insurance remains in effect for the policyholder's entire life, as long as the premiums are paid on time. In addition to providing a payout to beneficiaries upon the policyholder's death, permanent life policies also accumulate cash value that can be borrowed against. Permanent life insurance premiums are typically more expensive than term life premiums.
What Can Affect The Cost of Your Premium?
When you apply for a life insurance policy, the insurer will likely take several factors into account to decide whether or not they want to insure you — and for how much. Some of the factors that can affect how much you pay for a life insurance policy include:
- Your age. The younger you are when you purchase life insurance, the less expensive your premiums will likely be.
- Your health. Young, healthy people generally pay less for life insurance than older people or people in poor health.
- Your occupation. People with dangerous occupations such as pilots, firefighters and miners may be charged more for a life insurance policy.
- Your lifestyle. People who smoke, people with dangerous hobbies and people with a poor driving record may be charged more for a life insurance policy.
Speak With an Agent
A licensed agent can help you better understand your life insurance options and match you with a policy that works for you. Speak with an agent today at 1-800-966-7169.