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Understanding Term Life Insurance Premiums

Term life insurance provides coverage for a specific period of time and pays out a death benefit to the beneficiary if the policyholder dies within the term of the policy. 

In most cases, the policyholder pays a monthly premium in exchange for this coverage. Learn more about term life insurance premiums below.

4 Things That Can Affect Your Life Insurance Premium

The amount an insurance company charges for a life insurance policy depends on several factors:

1. Your Age

Simply put, the younger you are, the less expensive your life insurance policy is likely to be. That’s because as you get older, your chances of passing away become greater, and thus represent a higher risk to insurance companies.

According to some estimates, a 50-year-old male may pay an annual premium of $1,000 or more on a 20-year term plan, compared with a 30-year-old, who may pay only $300. This shows why, for some, purchasing a policy when you’re younger can be a better way to plan for the future.

2. Your Health

Many insurers require that you undergo a medical exam in order to qualify for coverage. This exam can have an impact on your term life insurance premiums.

As with your age, your health is one of many barometers that insurers use to gauge your life expectancy. For those in excellent health, premiums may be lower than for those with chronic health issues.

3. Your Family’s Medical History

Genetics can help predict some of the health issues you may face in the future. Therefore, a family history of heart disease, cancer and other life threatening diseases may affect your life insurance premium.

4. Your Lifestyle

If you regularly engage in dangerous activities, an insurance company could charge you more for your term life insurance policy. The following activities could affect the price of your policy:

  • Partaking in dangerous hobbies such as hang gliding and rock climbing
  • Smoking
  • Working a dangerous job such as mining or firefighting 
  • Driving recklessly — some insurance companies may evaluate your driving record when determining the price of your policy 

Types of Term Life Policies

There are several types of term life policies and each is priced a little differently. 

  • Yearly renewable. With these plans, your term life insurance premiums start at one rate. However, they may increase annually.
  • Level rate. A level rate term life insurance policy retains a fixed premium for set amount of time, but then increases annually after that period has expired.
  • Step rate. A step rate policy, similarly, will retain a fixed premium for a set amount of time, but will then jump to a new rate for another fixed period of time.

Other Factors to Consider

In general, if you outlive the term of your policy, you will not receive any death benefits. However, some policies do include return-of-premium features. In these policies, you can receive back some or all of your term life insurance premiums if you outlive the policy’s term.

Speak with a licensed agent at 1-855-303-4640 to learn more about your life insurance options, or read through our guide, How Does Life Insurance Work?

*Applications for insurance may be subject to acceptance by insurer. Rates and coverage amounts will depend upon the carrier selected.

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