Term Life Insurance is in essence a temporary contract. This means that this type of insurance will expire after a specified term, usually between 10 to 30 years (though this can vary with individual providers). Unlike a whole life insurance policy, term insurance does not accrue any cash value. Due to this, there are lower monthly premiums as you are in effect only paying for the 'pure' insurance, and not using a life insurance policy as an investment or savings.
There are also several factors that are taken into consideration when you are evaluated for coverage by a life insurance company. Basically, it comes down to the fact that no one can predict when you are going to die. Keeping this in mind, an insurance underwriter's job is to study factors such as your current health situation as well as your family medical history, any ill health in the past, and even your driving records and criminal history, if applicable. Most companies use something called as Mortality Tables to determine the applicable cost of your life insurance. These tables use a wealth of statistics to predict life expectancy by using three main factors - age, gender, and whether or not you smoke. These numbers will ultimately result in a decision about whether you can be insured and what premium you will have to pay.
Age - Age is one of the main factors in deciding the rate of your life insurance. You will pay a lower premium, the younger you are but will also end up paying for this premium over a longer period of time. Buying your insurance later in life will garner higher premiums but to be paid over a smaller time period. This is because the older you are, the more likely you are to pass away and due a claim on insurance benefits which will be paid to your beneficiary.
Gender - To determine if you qualify for the lowest life insurance rates, gender is another factor taken into consideration by life insurance underwriters. This is because statistics show that there are higher numbers of males that die at a particular age than the number of females who die at that same age. Insurance companies therefore take a bigger risk when insuring men, which will result in higher premiums.
Occupation - Your job and even your hobbies can affect your life insurance rate. There have been many instances where you qualify for a policy but may be rejected simply because of the nature of your job. If for example, your profession needs you to travel to dangerous countries; an insurance company may deny you coverage. Your hobbies can also affect your premium. If you indulge in extreme sports such as skydiving or rock climbing, you will have to pay a higher premium rate or may even be denied a policy. You may still have the option of applying for the policy if you are willing to pay higher premiums in order to provide for the extra risks involved.
Smoking - Using tobacco affects your life insurance rate adversely. Smoking ruins your health and increases the risk of cancer and premature death. As a result, your premium is adjusted accordingly. There is no point in lying to the insurance company and saying you don't smoke, if you really do. In case you do die from any smoke related cause such as lung cancer, the insurance company is fully within its rights to deny paying any benefits to your family. Even if you are a smoker or suffer from certain health impairments, you can increase your chances of getting a good rate by shopping around for life insurance. Rates can differ from company to company and some company may look more favorably on smokers than others. Shopping around will help you to find the best policy at the most affordable rates.
Health - A reputed insurance company will study your medical history and current health status in detail. Even common health conditions such as diabetes, obesity, and high blood pressure can lead to higher premiums. You also have to undergo a medical exam, paid by the insurer when applying for any life insurance policy. During the exam, the doctor will also ask about your family's medical history. If there is any hereditary pattern of ill health, this will be taken into consideration when fixing your premium rate.
Based on the above factors, there are various categories of Term Insurance Rates available. Keep in mind, different life insurance companies may have different names for these terms but they generally represent the how a life insurance company would qualify someone:
Preferred plus Term Insurance Rate: To qualify for this rate, you must be in excellent overall health. You cannot have a life threatening profession or have any history of drug or alcohol abuse.
Preferred Term Life Insurance Rate - You cannot use tobacco in any form to qualify for this rate. There can be no history of drug or alcohol abuse or any engagement in any hazardous activities.
Standard Term Insurance Rate - This rate applies to people with some minor health issues in their lifetime. These could include those who are 50 pounds overweight or have cholesterol levels of over 260.
Substandard Term Insurance Rate - For those with more than minor health problems, substandard rates will apply. Most companies will add to these premiums depending on the risk factors involved.
Now that you know on what basis your premium rate is fixed, it will be easier for you to decide upon which policy works best in your favor. Shop around, clarify any doubts and always ask your agent questions about how to get the best rates applicable on your on life insurance policy.
AccuQuote is a leader in providing term life quotes to people across the United States. In 1986 it began operating with a single goal: to make the process of buying term life insurance as easy as possible for its customers. Their experienced professionals consistently deliver the most affordable term life insurance rates by comparing thousands of life insurance policies from dozens of top-rated carriers.
