Term life insurance is one of the most powerful benefits a person can purchase, especially when his need for coverage is high but his financial resources are limited. Term policies can be purchased for very little money and can provide significant benefits to healthy individuals. Families can be protected and lifestyles can be maintained with the proper amount of term life insurance. Unfortunately, it is difficult to estimate the cost of a person's policy. Far too many factors go into determining how much someone would pay for a policy. However, it is possible to provide price points for the most common categories of people using the most common sizes of policies that are typically purchased.
With the significant number of factors affecting a person's life insurance premiums, it is difficult to provide a simple average cost that anyone can reference. Each life insurance company uses different business models and financial methodology affecting their internal profit margins, thereby affecting their company's specific price points for various products. Additionally, life insurance policies are priced based on the insured person's underwriting class, which is a determination made only after careful and in-depth consideration of all the facts involved in comprehending the carrier's level of financial risk.
All life insurance policy owners are placed into one of several underwriting categories based on the company's assessment of that person's financial risk. The most common underwriting category is most commonly referred to as standard. This term refers to an average, ordinary person in relatively good health, and encompasses the bulk of the general public. Those people who are in slightly better health and who seem to pose even less of a financial threat to the life insurance carrier are referred to as preferred. Finally, a very small percentage of the population may be classified as preferred elite, preferred best, or preferred plus, because they are significantly healthier than the average person and present a minute financial liability.
Term life insurance provides a death benefit for a specific period of time and then expires. Most life insurance carriers offer several different term policy durations ranging from five to 30 years. The most common term insurance policy duration is 20 years, and nearly every life insurance company offers a 20-year policy.
The size of a term life insurance policy is entirely customizable for the policy owner and should depend on the needs of the insured person and his family, and should consider the available monthly budget of the payor. Larger death benefit policies will cost more than policies with smaller coverage amounts. Most people grossly underestimate the amount of life insurance necessary to properly protect their families, which has resulted in a dramatic number of underinsured people. Still, even a small benefit is better than no benefit at all. The average death benefit amount for term insurance policies in the United States is less than $250,000.
Of the multiple factors affecting a person's life insurance premium, age and health are only on the surface. Myriad other issues relating to health status, personal habits, motor vehicle records, hobbies, medical histories and occupational risks contribute to determining the cost of a life insurance policy. Insurance company underwriters examine every aspect of a person's current situation in an effort to determine the likelihood of that individual dying while the term insurance policy is in force, and attempt to charge the insured person a premium that is appropriate to offset that financial risk.
Simply as a reference point, using age as the only adjustable variable, and averaging the 10 cheapest company premiums on the most common duration of the most common benefit, it can be said that a 30-year-old non-smoking male would pay about $25 per month for $250,000 of 20-year term life insurance; a 40-year-old would pay about $37 per month; a 50-year-old would pay about $84 per month; and a 60-year-old would pay about $242 per month.
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