Following the birth of our child, my spouse and I realized it was time to look into life insurance. Understandably, this becomes essential for ensuring the financial welfare of your dependents after your demise. After firmly resolving to obtain life insurance, we embarked on a journey of research to understand what factors influence the cost of life insurance. Here are some of the important elements we found that might help you in planning:
1. DETERMINING THE LIFE INSURANCE COVERAGE
The process of choosing the coverage level for your life insurance can be a little complex. Generally, you would need enough coverage to manage funeral expenses, clear any pending debts such as mortgages or car loans, take care of your children’s college fees, and perhaps provide for a year or more of living costs so your family can afford some time off to grieve without economic concerns. A policy with a $500K payout is likely to cost less than a $1M policy. However, bear in mind that today’s $500K might stretch further than $500K in the future due to inflation.
2. POLICY DURATION
A significant number of individuals opt for term life insurance which can last 20, 25 or 30 years. The concept of term life insurance suggests that at the end of the term if you are still alive, you receive no payout. A 30-year term policy is likely to cost more than a 20-year term one. The reason is the last decade carries a higher risk of you passing away thus the insurance firm may need to pay out. To balance this, they place a higher cost burden on you.
3. HEALTH CONDITION
Without a doubt, healthier individuals will find getting life insurance a much simpler task. If there’s a family history of life-threatening ailments such as cancer, you might still qualify for health insurance, however, the cost could be more than for someone with no such history.
4. BODY WEIGHT
Most insurance firms charge more for policyholders who weigh more. So, if you’ve considered shedding some weight, it’s advisable to do it before applying for life insurance. It could be beneficial to inquire about the company’s weight guidelines for your height. For instance, a male who is 6’1″ and weighs over 250 lbs could be viewed as a higher risk compared to another who is 210 lbs.
5. AGE FACTOR
The ideal age for a male to get health insurance is in his early 30s. During their 20s, men are perceived to be high-risk due to their tendency of taking more risks at this age. By their early 30s, many men stabilize and start families, hence are considered safer bets for life insurance providers – who ultimately aim for profitability. Older men, however, often carry a higher risk of developing life-threatening conditions. If you’re within the age bracket of 25-35, it would be wise to inquire about which age secures the lowest life insurance premium rates. You might potentially save substantial amounts over the term of the policy by identifying the cheapest year.
Have you encountered other factors that influenced life insurance costs? What are your recommendations for securing a less costly, yet reliable policy?
