Understanding The Cost Of Life Insurance
Unlike most insurance, the benefits of life insurance policies are not the insured. Because life insurance policies pay only when the insured person dies, designated beneficiaries receive the benefits. Most often, people with families need life insurance to make sure that, upon their death, their families can continue with their current lifestyle. Unfortunately, many people die uninsured, leaving loved ones behind in hardship
Many people do not buy life insurance because they do not think it is affordable. The cost of life insurance depends on various factors, including the age of the insured. Everyone will die sooner or later, meaning that every life insurance policy will pay if kept in force long enough. This means that older clients pay higher premiums because of their proximity to death. For example, a 40 year-old might pay less than $400 a year for a 20 year term policy, but a 60 year old could pay ten times that amount for the same coverage.
The cost of life insurance also depends on the type of coverage purchased. A universal life insurance policy has built-in investment components that can make them cost ten times the cost of a similar term plan or more. Some experts say that these cash-value insurance plans cost too much because of fees and low rates of return, but many people who can afford them buy them just for the peace of mind.
Benefit amounts also help determine how much a life insurance policy costs. Many strategists suggest that people should by life insurance that pays 7 to 10 times their annual income. Others suggest clients take a more detailed analysis to determine how much money survivors will need upon the death of the insured. Still, a policy that pays $250,000 costs less than one that pays $1 million, so clients should balance the needs of their beneficiaries with the amount of money they have to spend on insurance.
Health and lifestyle comprise another large part of the life insurance premium. Insurance companies assume that people that smoke or take depression medication will die sooner than others who do not. Similarly, insurers will rate their risk higher for obese people. Cancer and other diseases can also affect the cost of insurance; that’s why many policies come with a health exam requirement.
Many people do not buy life insurance because they do not think it is affordable. The cost of life insurance depends on various factors, including the age of the insured. Everyone will die sooner or later, meaning that every life insurance policy will pay if kept in force long enough. This means that older clients pay higher premiums because of their proximity to death. For example, a 40 year-old might pay less than $400 a year for a 20 year term policy, but a 60 year old could pay ten times that amount for the same coverage.
The cost of life insurance also depends on the type of coverage purchased. A universal life insurance policy has built-in investment components that can make them cost ten times the cost of a similar term plan or more. Some experts say that these cash-value insurance plans cost too much because of fees and low rates of return, but many people who can afford them buy them just for the peace of mind.
Benefit amounts also help determine how much a life insurance policy costs. Many strategists suggest that people should by life insurance that pays 7 to 10 times their annual income. Others suggest clients take a more detailed analysis to determine how much money survivors will need upon the death of the insured. Still, a policy that pays $250,000 costs less than one that pays $1 million, so clients should balance the needs of their beneficiaries with the amount of money they have to spend on insurance.
Health and lifestyle comprise another large part of the life insurance premium. Insurance companies assume that people that smoke or take depression medication will die sooner than others who do not. Similarly, insurers will rate their risk higher for obese people. Cancer and other diseases can also affect the cost of insurance; that’s why many policies come with a health exam requirement.
