* NEW QUOTES ONLY PLEASE
We do not have information
about existing policies.
The Cost of Life Insurance: How Coverage Is Priced
There are several factors at work when determining the cost of life insurance. These factors include the mortality charge, underwriting, the type of policy you are purchasing, and the cost of the policy itself. Rates vary from company to company, but they all use the same basis of information to set their costs.
Your Age and the Mortality Charge
The mortality charge is the base rate of charge for a person of a certain age. Each age bracket has a number that corresponds to the dollar amount of their worth per $1000 of insurance. These numbers are determined by statistics showing the average mortality rate of an age group. Statistics may show that in a group of 1,000 average 30-year-olds, only two may be expected to die in a year, and therefore the insurance company will only have to pay benefits on two policies, a small risk. As the age of the insured increases, so does the risk that they will die and therefore the risk that the company will have to pay out on a policy.
Health and Lifestyle Factors
There are other factors looked at, however, besides age. Your health and lifestyle also have a big impact on the cost of insurance. People with certain health conditions, such as diabetes or heart defects, may be expected to die sooner than others of the same age, which will add to the cost of the premium. This also applies to people who smoke. Those who work in hazardous conditions or in a job where risk is a part of everyday life, such as construction or factory work, will also face higher premiums because their chance of dying is higher.
Type of Life Insurance Policy
The cost of policies varies as well. Term life is cheaper than whole life insurance because it is purely insurance and has no cash value. Whole life insurance, because part of the premium is set aside into a cash value account, has higher premiums in order to pay for both the insurance and the savings. Of course, with whole life, there is also a charge for the company’s management of your money, and that is factored in additionally.
The cost of the premium also pays for the costs associated with your policy, which is called loading. The commission your agent will be paid is an example of loading, as are any clerical costs, employee salaries and other concerns. The mortality rate number and the cost of all the additional factors are then added together to arrive at the final rate cost. For example, a 40-year-old male in average health may have a final rating of 4.20, so his cost would be $4.20 for every $1000 of insurance he buys, making a $100,000 policy cost $420 per year.
When everything is added up, the agent will present the policy and premium amount to you, at which time you can decide if it is both agreeable and affordable, and coverage can begin as soon as the first premium or deposit is paid.
What would you like to do next?
Request a free quote for life insurance coverage >>