One of the primary reasons people decide not to get a life insurance policy is because they think life insurance rates are too expensive. But, when they dive deep into exploring the world of life insurance, they end up shocked at how wrong they were!
Today’s article will clarify the actual cost of life insurance rates, and we will cover:
- What are the factors that determine life insurance costs?
- Different types of life insurance policies.
- How much is the average price by age?
- What is the best life insurance policy?
- How can you gain financial freedom?
Let’s get started!
Factors that Determine Life Insurance Cost
The cost of life insurance varies. Yes, it would be easier to know how much it will cost per month straight out of the bet, but it isn’t the case. Life insurance providers consider many factors when determining people’s eligibility for coverage and premiums.
The risk of a life insurance company paying out death benefits is a crucial aspect of life insurance rates. It means that anything increasing people’s mortality risk will raise their rates.
Life insurance companies develop medical exams, health questionnaires, and other underwriting checks to analyze the potential risk.
One important note: don’t try to trick life insurance companies with your health status. By lying, you are only at risk of losing your policy when they discover or deny your death benefit payout.
Let’s see the list of factors that will determine your life insurance cost.
State of Health
The person’s health is the most significant factor in determining the cost of life insurance. People with chronic health issues that increase their mortality risk will pay a higher life insurance rate than people of the same age but without problems.
However, there are some ways for these people to still have a decent option for their insurance, like a guaranteed-issue life policy or other policies that don’t require a medical exam. A state of health includes any pre-existing conditions, as well as your blood pressure, cholesterol levels, your height, and weight.
Family History
Many life insurance companies also require family medical history to look for indicators of severe health conditions like cancer, diabetes, or heart disease. Even if your overall health is fine, but your family health history is assessed as risky, you will have higher rates.
Age
It’s not illogical that age is a huge factor in determining the monthly insurance cost because age is one of the most significant mortality indicators.
Rates increase as you age due to a decrease in your life expectancy. Therefore, older people are more likely to pay more for their insurance. However, the age of the participants is relevant only when they’re getting a policy.
With most policies, you won’t pay more after every year because you’re aging. That’s why we often hear that the sooner we get the policy – the better.
For instance, the average life insurance quote only rises by 6% between ages 25 and 30. Still, life insurance quotes jump much higher between ages 60 and 65 – an average increase is 86%.
Gender
According to most statistics, men have a lower life expectancy than women. Thus, life insurers take this into account, and because men represent a higher risk to life insurance companies, they usually pay more than females of the same age and health.
Coverage Amount
When you get a policy, one of the crucial decisions you must make is how much coverage you need. This decision will affect your cost of life insurance – higher coverage limits will be more expensive because the life insurance company agrees to pay out more upon your death.
Your Job
What you do for a living is another factor that influences the policy’s price. People in dangerous positions, like piloting, war reporting, or law enforcement, have a greater mortality risk than in other professions. Because of the higher risk, they might pay more for insurance than others.
Lifestyle
If you regularly expose yourself to activities considered to have a higher mortality risk, the insurance company will charge you more. We mean skydiving, alcohol or drug use, and traveling to war zones.
Once again, due to increased mortality risk, life insurance companies will charge more. There is also a possibility of denying your application because of your lifestyle.
Criminal History
Previous arrests or other criminal convictions may affect your rate or disqualify you from coverage with some insurers. Your driving record is also in consideration.
If you have DUIs, DWIs, and major traffic violations on your record, your insurer might consider you a high-risk applicant and charge more.
Type of Life Policy
There are two significant categories of insurance policy – term life and whole life insurance, and several sub-categories. Both policy types can provide valuable financial protection in the event of an unexpected death. Depending on your choice, there is a price difference.
Generally, a term life insurance policy is more affordable than whole life but offers less significant benefits. We will talk about that in the following.
Elements that Don’t Impact Life Insurance Premium
We saw that many factors affect the life insurance premium, but some don’t.
Location
The place you live will not affect the cost, unlike home or car insurance. Still, you will need to provide your address on the application.
Credit Score
Home and car insurance rates are usually factors in the credit tier (in most states), but it is not the case with your life insurance policy.
Your actual credit score won’t affect your premium, but any bankruptcies or other risk factors identified in your credit report may.
Also, a long period of unemployment will make your rate higher.
Different Types of Life Insurance Policies
Every individual of adult age with child care or financial obligations should buy life insurance to help pay for those obligations in the event of their death. You must first decide whether you will get a term life insurance or a permanent policy.
Average monthly costs are different depending on the policy type. Let’s see the difference between these two and why they have different prices.
Term Life Insurance
Term life insurance provides coverage for a specific time, usually between 10 and 30 years. If the insured person dies during that period, the beneficiary will receive the death benefit.
There are many different types of term insurance:
- Decreasing term life insurance,
- Level premium term life insurance,
- Increasing term life insurance,
- Convertible term life insurance,
- No medical exam life insurance,
- Renewable term life insurance,
- Return of premium insurance,
- Group term life insurance.
So, there are many variations between all these subtypes, and if you decide to get a term life policy, you will have to do more research. However, the general term life insurance category is more affordable than permanent life insurance. Even though it is cheaper, it also offers fewer possibilities.
It’s important to pick a policy that offers enough coverage and fits your needs. The advice is to get life insurance worth ten times your annual income. Your choice should also depend on your financial goals, not the monthly cost.
Permanent Life Insurance
Unlike term policies, permanent life insurance offers lifelong coverage. Besides that, they also provide an opportunity to build cash value which accumulates on a tax-deferred basis.
Permanent policies are more expensive than term, but they offer more features and benefits. Factors that determine life insurance rates are the same as we already mentioned.
Permanent life insurance coverage is designed to accomplish two different goals:
- To provide a safety net or an inheritance for the insured’s loved ones in the form of a death benefit after they die.
- To help and support individuals to save and borrow from themselves.
There are three main types of permanent policies:
- Whole life policy,
- Universal life insurance policy,
- Variable life policy.
As we saw, we have more options with this type of policy, so, logically, it would be more expensive. Here are some main reasons why people prefer permanent insurance over term life insurance coverage:
- It supports lifelong protection.
- You can easily build wealth and leave it to heirs.
- You can capitalize on a policy as an investment vehicle.
- You can ensure that your family gets the money to pay funeral expenses and others.
- Extra tax advantages like income-tax-free dividends, tax-free policy loans and withdrawals, a tax-free death benefit, tax-deferred cash value growth, and much more.
With that being said, let’s see how much life insurance rates cost.
Average Life Insurance Cost by Age
As mentioned, the critical factors determining insurance price are gender, age, coverage amount, medical history, and type of insurance policy.
Average Cost of Term Life Insurance Rates by Age
These annual life insurance rates are based on a 20-year, $500,000 term life insurance policy for super preferred applicants.
Average Rates of Whole Life by Age
The following annual rates are based on a $500,000 policy for super preferred applicants.
Price of Life Insurance Without a Medical Exam
Here is what you can expect to pay annually for a $500,000, 20-year term life policy without going through medical tests.
Average Life Insurance Rates of Term Life Insurance by Health
These annual rates are based on a $500,000, 20-year term life policy.
Average Cost of Life Insurance by Term Length
These annual term life insurance rates are based on a $500,000 term life policy for a 40-year-old applicant in the super preferred class.
Unfortunately, we can’t cover every possible scenario for every applicant and their price. We highlight the basics to give you a better picture of the price range.
You can also use an online comparison tool that shows you life insurance rates from multiple companies, making it easier to compare rates and find the most suitable one.
But if you are researching online, please be advised that information may differ from what you see when you visit a financial institution, service provider, or specific product site. All life insurance products, shopping products, and services are often represented without a warranty.
If you didn’t find your situation in our analysis or have concerns about something, the best thing to do is set up a meeting with an insurance agent. An insurance agent will give you a specific and unique life insurance plan, help you decide how much coverage you need, and you will know exactly how much your life insurance premiums are.
What Is the Best Life Insurance Policy?
We believe that the best policy to buy is whole life insurance. A whole life is permanent life insurance that provides coverage for the policyholder’s entire life. Besides death benefit, it also includes a cash value option.
After filling out the application, people undergo an underwriting process and medical tests. After that, based on their life expectancy, the insurer’s actuaries set guaranteed values:
- A guaranteed death benefit. It is the amount of money that will be paid to your beneficiaries and is secured, so it never decreases.
- A guaranteed level premium: The policy will stay in effect as long as policyholders pay premiums, which never change throughout the policy.
- A guaranteed cash value: cash value grows at a set rate annually until it is equal to the face amount of the policy at a specified age.
Therefore, a whole life policy is far more than life insurance. The cash value from the policy allows you to borrow money against it and use it however you want.
An additional important decision you need to make is what is the best insurance company. The best company is a mutual insurance company. Why?
Because you could be paid a dividend each year. When the company is profitable and pays all its expenses, the remaining money is returned to the policy owners as a dividend. This is called return a premium. And, the IRS doesn’t tax you on dividends!
You don’t have any obligations to get the dividends. The only requirement is to have a policy.
According to Investopedia’s estimate, monthly whole life costs are five to 15 times more expensive than term life insurance rates. Put in this way, it can seem like an enormous amount of money.
However, the most crucial thing is the ratio between the price and the benefits you get. If you see it that way, a whole life policy is far more valuable even though the whole life insurance rates are higher.
The only reason for higher life insurance rates is the cash value component. You don’t waste your money. You’re just paying more for another way of using your policy – as an investment vehicle. Additionally, thanks to the investment component, you are in a position to build your wealth.
Which Policy Should You Choose?
If you’ve decided to buy life insurance, but you’re not sure which type of policy is for you, ask yourself the following questions:
- Do you want to build wealth and leave money for your family?
- Do you want to cover your funeral costs?
- Are you interested in investing?
If you say ”Yes!” to any of these questions, the whole life policy is for you.
Extra Tips
It’s essential to consider everything when choosing your policy, not just its price. We live in economically uncertain times, and we all want to do the best possible with our money, especially in times of inflation and recession.
Saving every dollar is crucial if you want to be financially secure, but it doesn’t refer to the cost of the policy.
In fact, with a whole life policy, even though it is more expensive monthly, you can have an investment opportunity that will make you money. In the period of inflation, it will be a significant inflation-proof investment that will help you beat it!
Moreover, don’t be afraid to use your whole life as an investment vehicle.
Most people have animosity when they hear the word ‘investing’ because they think it is a risky way to gamble with your money, stock fluctuation, and an activity that only professionals can do.
Whole life is a proven way to invest and earn money without the risk of losing your money, and you don’t have to be a financial advisor to do it.
Gain Financial Freedom
And there are more reasons why we think the whole life is the best available policy. One of the key reasons we (and many others) prefer whole life over other alternatives is the option to establish the Infinite Banking Concept – the popular way to earn more money.
The Infinite Banking Concept
The Infinite Banking Concept, also called over-funded life insurance, is a process that helps individuals get a better return on their investment and simultaneously build wealth and create a better future. The basic idea of over-funded life insurance is strategically using a whole life policy as a personal endless banking system.
You borrow money against your policy and dictate cash flow. At the same time, you allow your policy to earn dividends even through using that money elsewhere. In other words, you build wealth by borrowing and repaying the money held in the policy’s cash value.
Thanks to this process, you can say goodbye to traditional banks and their high fees and taxes on personal loans. Infinite Banking Process aims to duplicate the function of the conventional bank as much as possible to help you build value and support you to be your own bank. Therefore, you will have your private bank through life insurance.
The Infinite Banking strategy has more benefits than any other life insurance. It allows you to achieve your financial goals. And, thanks to the whole life policy, you can have everything – lifelong coverage and, on the other hand, an investment vehicle that will help you become financially independent.
Final Thoughts
As we saw, insurance costs depend on factors like age, gender, state of health, and much more.
Also, the type of policy determines the price difference. Term life insurance rates are more affordable, but we think that price is secondary in choosing life insurance. More critical are the benefits, opportunities, and what you get with the money that you invest.
We think a whole life insurance policy is the best option for most people because it has a death benefit and investment component. Even though its rates are higher, it allows you to become financially independent through Lifestyle Banking.
Lifestyle Banking is a personal banking system similar to Infinite Banking but taken to another level. We at Wealth Nation don’t teach you only how to move money as Infinite Banking does. We teach you the psychology of money, how to become wealth conscious and truly live your lifestyle.
Watch our free masterclass, and you will learn how to use your policy, set up your bank, and generate wealth using the Lifestyle Banking system.