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Accurately Estimating Term Life Insurance Cost

What does term life insurance cost? It’s one of the most common questions asked by consumers on the hunt for a term life insurance policy, and one of the hardest questions to find a straight answer for. That’s not because insurance providers are trying to keep you in the dark, however, or because they’re trying to nickel and dime you to death for coverage. The truth of the matter is that term life insurance premiums are dependent on a number of factors, including your present health and past health history, your age, the length and amount of coverage you choose, the larger term life insurance policy market, and even your extra-curricular activities. Understanding where you stand on all these fronts is the key to figuring out what term life insurance costs you’re likely to face.

Ball Park Guesstimates for Term Life Insurance Cost

All that said, let’s start with some general figures for a term life insurance policy so that we have a baseline to work with. Business and financial expert Daniel Workman used a basic life insurance calculator to compute a list of estimates for term life insurance policies for men aged 20 to 55 years old. Keeping in mind that these stats don’t take into account all of the factors listed above, there are two trends that leap off the page when reviewing his numbers.

  • #1: Age Matters —The first thing that’s apparent in Workman’s report is how much age matters where term life insurance cost is concerned. For example, for every $100,000 of coverage in a standard 10 year term life insurance policy, Workman found that a 20 year old male in good health can expect to pay about $133 per year, a 30 year old will pay $134, a 40 year old will pay $170, a 50 year old will pay $310, and a 55 year old male can expect to pay $455 per year. That’s nearly a 250% difference in premiums between a 20-30 year old and someone who is just 55 years young.
  • #2: Think Long Term While You’re Young —The other striking thing about Workman’s research is how much you can cut term life insurance cost by investing in a longer term when you’re a relative youngster. If you stick to 10 year terms, you’ll eventually be facing that 250% increase in premiums no matter how healthy you are. Invest in a 30 year term when you’re 20 years old, however, and you’ll pay $187 per year per $100,000 of coverage for the duration of the policy. Put simply, if you think 20 or 30 years ahead rather than short term, you can literally save thousands of dollars in premiums over the long haul for the exact same coverage.

Term Life Insurance Policy Costs in a Less Predictable World

As helpful as it is to get an idea of what you’re likely to face when it comes to term life insurance cost, it’s also important to be realistic about other factors that might influence your rates. Here are a few things to keep on your radar as you start shopping around.

  • Coverage Amounts —Remember, the estimates listed above are for $100,000 in coverage. Since most insurance experts recommend life insurance coverage in the $500,000 to $1,000,000 range for an average American, you’ll need to multiply the costs accordingly.
  • Your Health (Present and Past) —It’s the job of insurance underwriters to identify red flags in your health history, present and past, and to adjust your premiums accordingly. Factors that can negatively influence your rates include high cholesterol, hypertension, obesity, excessive use of alcohol, and any use of tobacco.
  • Other Factors —Determining term life Insurance cost is all about evaluating risk, and the more risks you take, the higher your cost is likely to be. For example, if you have a high risk occupation like law enforcement or serving in the military, frequently travel to third world countries for recreation, or like to skydive as a hobby, your premiums may be affected.

The Big Picture: How to Make Term Life Insurance Affordable

While there are multiple factors that can drive your premiums up, the most important thing to keep in mind is that term life insurance is very affordable for most Americans (in fact, average premiums in the U.S. have dropped 75% over the last 20 years according to research firm LIRMA). Furthermore, there are steps you can take to cut your costs even more. Obviously, limiting your risk factors by living healthy is a big one, though being a smart shopper can add up to equally large savings for you and yours. In a 2010 review of life insurance, Consumer Reports stressed the importance of shopping around, and of taking advantage of online insurance brokers like to help you find the best coverages at the best rates. By using an online quote service, you can compare the coverages, premiums, and services of a host of life insurance providers at the click of mouse, saving you valuable time and dollars on the way to protecting the people in your life that matter most.

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