How Much Does Life Insurance Cost?
The cost of life insurance can vary widely and is based on a number of factors which include:
- The type of policy;
- Your age;
- Your gender;
- Your height and weight;
- Your state of residence;
- Tobacco use;
- Your health classification;
- The length of coverage; and
- Payment frequency.
Each of these factors is discussed in more detail below:
Type of Policy
The type of life insurance policy you purchase will affect the cost of the premium. Rates for term life insurance are typically lower than whole life insurance and other types of permanent life insurance, particularly when you are younger.
Because whole life insurance includes an investment component and premiums are constant throughout the policy period, the rates can be five to 10 times more expensive than a term life policy.
Age
The cost of life insurance increases as you age due to the increased risk of mortality. Some term life policies are renewable when the coverage period ends, but the premium will normally increase due to your increased age.
Gender
Your gender affects your rate due to the differing life expectancies between men and women. On average, women have a longer life expectancy than men; therefore women will generally pay a lower premium than a man of a similar age (for the same length and amount of coverage).
Height and Weight
People often question why life insurance companies want to know their height and weight. What they really want to know is your weight to height ratio. The larger your are for your height, the greater the risk you will have or develop diabetes, high blood pressure, or a heart condition – all of which can adversely affect your life expectancy. As a result, if you have a high weight to height ratio you are likely to pay more for life insurance. Similarly, if you have an unusually low weight to height ratio you may also pay a higher premium than someone with a standard build as this could also be considered an indicator of poor health.
State
Your state of residence can impact your premium for two reasons. Firstly, insurance companies are regulated at the state level. All insurance companies operating in the state must comply with state laws and regulations, and may even have to pay special fees to the state. The cost of complying with these laws and regulations varies from state to state. Regulatory costs incurred by the life insurance company are generally passed down to policyholders through higher premiums. If you live in a state with a high cost of regulatory compliance, your premium is likely to be higher than a similar policy in a low-regulation state.
Secondly, not all insurance companies offer policies in all states. The number of insurance companies operating in each state affects the amount of competition between companies. Premiums tend to be lower in environments with more competition, and higher with less competition.
Tobacco Use
Any type of tobacco use will negatively affect your life insurance premiums due to the increased risk of lung cancer, throat cancer, heart disease and cardiovascular disease.
Insurance companies will often distinguish between cigarette smokers and those who use what is known as "other tobacco". Other tobacco use includes smoking cigars, smoking a pipe, chewing tobacco, using dip, snuff, nicotine patches or nicotine gum. Other tobacco users may receive better rates than moderate or heavy cigarette smokers.
If necessary, tobacco use can be accurately detected through a medical exam, so don't be tempted to lie about tobacco use in your insurance application.
It is possible for a smoker to find affordable life insurance. There are even some companies that specialize in providing policies for smokers. We can help secure competitive life insurance quotes for smokers and other tobacco users.
Health Classification
You health classification is a general category you will be assigned to by the life insurance company. This will be based on their evaluation of your general health and wellbeing.
The insurance company uses the information you provide to them to determine what category you fall into. This information might include your personal health history, your family health history, and the results of any medical examination (if required).
Insurance companies may have numerous health classifications such as Preferred Best, Preferred, Standard Plus, and Standard. The better classification you are placed in, the lower your premium.
Length of Coverage
The length or period of coverage you choose will affect the cost of your premium. A longer term will result in a higher premium because the insurance company will be exposed to more risk.
However, this doesn't mean you should automatically choose a shorter term. If you think you will need life insurance for a long period of time, it is better to try and lock in a fixed rate now for the entire period than be faced with premium increases and/or the requirement to undergo a medical examination each time you renew your policy.
Payment Frequency
The frequency at which you pay your premiums will affect the cost. Paying your premiums quarterly instead of monthly will lower the cost of your premium. Paying your premiums annually rather than quarterly will lower your premiums even further. If you can, pay annually to save the most money.
Because most of these factors are based on you, the best way to find out how much life insurance would cost you is to request a quote.
