Term Life Insurance Policies Are The Cheapest Ones Among The Lot
Post date: March 15th, 2010 |
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Do not buy term life insurance if you are looking for some reliable saving option or pension plans. Term life does not provide them. This is a pure insurance plan and it will provide the following benefits if the insured person dies within the stipulated term:
• funeral cost of the deceased
• dependence care
• dependence’s collage education
• mortgage coverage
• coverage for consumer loans
In term life insurance plan the death benefit is in the form of a lump sum amount that the beneficiaries get in the event of death of the insured person within the term of the policy. The term is the most important factor in determining the term life insurance rates and has to be decided very carefully. This is because if the insured person dies even one day after the expiry of the term of the policy then the beneficiaries do not get the death benefits. Still some people prefer to buy term life insurance policies because of the affordable rate that it offers.
The rates of term life insurance are far lower than any other form of life insurance. But then you may think like how is it possible for the insurance company to offer such low rates for the policies. This can be understood from the fact that as health and other habits are crucially checked while you buy term life insurance policy, the companies make sure that the person does not have chances of facing death within the term of the policy. If you tally the records it is also seen that less than 1% people die within the term. So in most of the cases the companies do not have to give the death benefits to the beneficiaries.
Before the carriers are willing to cover you they make sure that, you are insurable. The four factors that they take into account before selling the coverage or fixing the rate are –
• Age – Younger you are, lesser is the term life insurance rate. Older you are, higher will be rates because you are now more likely to die within the term.
• Gender – Women have longer lifespan and so are charged at a lower rate than men are.
• Tobacco Use – Smokers have to pay at a very high rate.
• Health Class – Healthier you are lower is the rate, because a healthy person is less likely to die.
The rates in term life insurance also varies depending upon the factors that are stated above. A smoker will have to pay higher rates compared to a non-smoker for buying the same policy. This actually depends upon the assessment of the insurance company as to whether the person who is willing to get insured will survive the term or not. In most cases the insured person survives the term of the policy and hence the company does not have to pay any death benefits in that case.
One more factor that reduces the term life insurance prices is the underwriting cost. As in term life insurance there is no cash value hence the underwriting cost is also very little. Another factor that impacts the price of the term life insurance is the body mass ratio. This implies that a slimmer person will have to pay less for life insurance compared to an obese person as slim and fit people have longer life span than obese people.
Deciding the coverage term could be the most crucial aspect of buying a term life insurance policy. If you decide it correctly then you may be able to bag the best deal in terms of rates. If you are buying the policy to mitigate some liability then you should be able to project as to how long your liabilities will continue and plan the term coverage according to it. If you are taking it for general life coverage then getting coverage for 65 years is not a bad bargain.
The rate of the term life insurance also depends upon the coverage amount. Higher the coverage amount higher is the applicable rate. In fact while deciding the coverage amount many factors like the expenses of your family, inflation, and interest rates are also considered. It is difficult to project the exact amount but multiplying your income 15 times to an extent can meet your needs.
Buying a life insurance can be really difficult if you have reached your fifties and sixties. In such cases you will have to pay very high cost for the policies which are financially not viable. But if you still need life coverage then buying annual insurance policies are a better option. Make sure that you add a compulsory renewable clause which will help you get the insurance policy the following year also or else you may not be given the policy the next time you try to get one.
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