Explaining How Term Life Insurance Premiums Are Set

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Explaining How Term Life Insurance Premiums Are
Set
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• Life insurers base term life insurance rates on
  the age, general health and whether or not the
  named insured smokes tobacco. The named insured
  is the person whose life is covered by the
  insurance plan.
• There are no medical exams required when applying
  for the term coverage. Instead, the personal
  information of the named insured is compared to
  mortality tables that make it possible for life
  insurers to calculate the odds of someone dying
  while the insurance plan is in effect and come up
  with a term life premium. While it is somewhat
  easy for insurers to come up with rates, they do
  adjust term life prices by age. The younger
  someone is, the easier it will be to get
  inexpensive term coverage.

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• A healthy man or woman in his or her 20s or 30s
  who does not smoke or engage in risky activities,
  such as diving, the lower the cost for the term
  coverage. But the older the named insured is, the
  higher the rate will be for the life policy.
  Although term life plans can be very affordable
  for younger people, if the named insured also
  smokes tobacco, the term life insurance rates
  also will be much higher.

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• People who smoke cigarettes and other tobacco
  products generally are charged about double the
  amount non-smokers must pay for the same length
  of term coverage with the same death benefit.
  Non-smokers can get a 30-year term insurance plan
  with a 250,000 death benefit for about 15 per
  month from many life insurers. Those who smoke
  tobacco would be charged about 30 per month for
  the same death benefit on the same life plan.

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• But the rate for even those who are smokers is
  much lower than would be paid for a whole life
  plan with the same death benefit. For non-smokers
  in good health and with no family history of
  cancer, heart disease or other potentially deadly
  illnesses, the monthly premium might be as high
  as 200 or more for a whole life insurance plan
  with a 250,000 death benefit. That makes a term
  policy a more affordable Term Insurance Premium
  Calculator option for many people.

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• About the only time term policies can be somewhat
  costly is if the named insured is in retirement
  years and wants a large death benefit or if the
  policyholder chooses an annual renewable plan.
  Each year an annual renewable term policy is
  renewed, the premium will rise. Carrying such a
  policy for 10 years or more could result in
  premiums that will be much higher than if simply
  buying a 10-year term plan or even a whole life
  insurance plan over the long run.

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