Factors That Influence Term Life Insurance Rates


Term Life Insurance RatesThere are many different factors that influence term life insurance rates. Besides the risk that policyholders represent to the company as far as potential future claims, the carriers also look at their book of business and the goals they hope to achieve in order to accurately price their products.

I’ve put together a few of the factors listed below that influence Term Life Insurance Rates for different types of life insurance polices.

Need help planning? Try the Term Life Insurance Needs Calculators. Then use the Quick Instant Term Life Quote form to the right.

Smokers

There are options for term life insurance for smokers. Term Life Insurance Rates for smokers will likely be higher then a non-smoker.  Typically smokers fall in to the High Risk Life Insurance category. The most obvious ways that carriers break down the cost of term life insurance is by separating smokers from nonsmokers. Although most carriers will have their own approach to classifying these two rate classes, a general guideline is that those who have quit tobacco for a solid two years may be considered for nonsmoker rates.

Due to the increased risk of cancers and other diseases, tobacco users will pay more for their term life insurance.  There are affordable term life insurance quotes out there for smokers depending on the carrier.

How Age plays a roll in Term Life Insurance Rates

Younger, healthier clients are the most likely to receive the best rate classes for term life insurance, which are generally classified as “super preferred” or “preferred best”. This is what makes getting term insurance at an early age so affordable for the value.

Older clients will see higher term life insurance rates depending on the coverage length, but this doesn’t mean that term insurance is not affordable. On the whole, term life insurance is one of the most affordable and reasonable options for today’s consumers.

Family History

Actuaries use complex calculations to determine the relative risk factors of various health or family history issues. Working with mortality data, actuaries are charged with determining how much a rate should be altered based on the data provided by the applicant.

One “red flag” that you may be paying higher rates are having parents that passed away prior to age 65, a family history of cancers or heart disease, or other long-term chronic issues, might move an otherwise preferred or standard risk to a table rated risk class. This doesn’t necessarily mean that coverage will be denied, but it could be that the coverage is more expensive based on what the insurance carrier sees as “increased risk”.

Coverage AmountLife Insurance Rates

Determining the face amount for the policy is an important calculation that should incorporate any outstanding debts, plans for children to attend college, and income replacement. The higher the face amount of the policy, the more the policy will cost.  Try using the our Term Life Insurance Calculators to help figure out exactly what you need.

Riders

Since most term life policies have flexible rider options, this can influence the final premium rates. Child riders or waiver of premium riders are considered “add-ons” to a traditional policy, but they tend to represent a very small factor of the premium cost. For these reasons, term life insurance seekers are encouraged to add needed riders at the outset of their policy.

 Interest Rate Environment

Particularly on cash value accumulation products such as indexed universal life, carriers rely on certain speculations or predictions about the interest rate environment. Why does this matter for term life insurance rates?  Term life insurance is typically only one product in a carrier’s portfolio.

If the carrier  can’t make returns on their investments, it’s challenging to offer high caps or good returns on the products they have made available. For that reason, depending on the interest rate environment at the time of application, term life insurance rates may be fluctuating low to encourage more sales of those policies to make up for losses in their cash value products.

As we can see there are a lot of different factors that Influence your Term Life Insurance Rates. Term life insurance is a vital purchase for today’s working families. For a very affordable cost, individuals can obtain protection for their families for whatever term they deem necessary (typically between 10-30 years) and can even opt for a no medical exam life insurance policy. Since many factors can influence the final rates in the premium calculations, it’s helpful to receive a term life insurance quote to get a sense of the cost. Use a calculator or quote engine from any reputable website to view affordable term life insurance quotes before putting in for an application.

-Jim

Great Investopedia article.. 10 myths about term life insurance rates.

 

About Speights Risk Management

Speights Risk Management is a family Life Insurance Agency that has been helping families and businesses for over 40 years. Questions? Contact us at 401-884-4600.

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