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Many Factors Go Into A Term Life Insurance Premium

By Mike Heuer

Term life insurance is one of the easiest life insurance products to purchase in part due to the easy underwriting required to determine a term life insurance premium.

Life insurers base term life insurance rates by age, general health and whether or not the named insured smokes tobacco. That information is compared to mortality tables that make it possible for life insurers to calculate the odds of the person dying while the term life plan is in effect and come up with a term life insurance premium. The named insured is the person whose life is covered by the life insurance plan.

While it is somewhat easy for insurers to come up with term life insurance prices, they do adjust term life insurance rates by age. The younger someone is, the easier it will be to get cheap term life insurance coverage.

A healthy man or woman in his or her 20s or 30s who does not smoke or engage in risky activities or employment, such as diving, the lower the cot for cheap term life insurance that gives high-quality coverage. A healthy person who does not smoke and is 40 years of age can purchase a 20-year term life policy with a $500,000 death benefit or about $30 per month. But a 50-year old person in good health and who also does not smoke might pay closer to $90 per month for the same term life plan.

While term life can be very affordable for younger people, if that person smokes, the higher the term life insurance rates will become.

People who smoke cigarettes and other tobacco products generally are charged about double the amount non-smokers must pay for term life coverage with the same death benefit, but that makes them very affordable all the same. Non-smokers can get a 30-year term life insurance plan with a $250,000 death benefit for about $15 per month from many life insurers. Those who smoke tobacco would be charged about $30 per month for the same death benefit on the same term life plan.

But the rate for even those who are smokers is much lower than would be paid for a whole life insurance plan with the same death benefit. For non-smokers in good health and with no family history of cancer, heart disease or other potentially deadly illnesses, the monthly premium might be as high as $200 or more. That makes term life a much more affordable option for many people.

About the only time term life can be a somewhat costly choice is when obtaining an annual renewable plan and carrying it for many years. Each year an annual renewable term life plan is renewed, the premium will rise. So carrying such a policy for 10 years or more could result in premiums that will be much higher than if simply buying a 10-year term life plan or one of longer duration.