What You Can Expect to Pay for Term Life Insurance
Life insurance protects your family from your unpaid financial obligations when you die. You have two choices in life insurance: term life and permanent life insurance. Permanent life insurance offers a death benefit and cash value savings and is generally considered to be more expensive than term. If you opt for term life insurance, make sure you understand how much you are likely to pay.
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Types
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There are two main types of term life insurance. Annual renewable term life insurance offers premiums that are low in the early years of the policy and rise over time. Level term life insurance offers premiums that remain level for the duration of the policy.
Significance
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Annual renewable term life provides coverage that continues until you are not longer insurable. Level term life insurance guarantees coverage for a set number of years. With annual renewable term life, your policy never "expires"--it simply renews for the next year with an increase in the premium amount. With level term life insurance, policies do expire, but the premiums are known in advance. In both cases, your age and your health determine the cost of insurance.
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Benefits
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Annual renewable term insurance gives you the cheapest term life insurance policy available in the early years of the policy. Level term life insurance provides a guarantee of consistency in premium payments, since they are known in advance for the entire duration of the policy.
Drawbacks
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Annual renewable term life insurance gets more expensive over time. The increase in premiums is a result of the fact that no money is being invested by the insurance company to hold down the rising cost of insurance. The drawback to level term life insurance is that, unlike annual renewable term, the term only lasts for a set number of years. Once the term is up, the policy terminates and you must re-qualify for life insurance. The older you get, the more expensive the policy becomes in an annual renewable term policy. In a level term policy, premiums are higher than the initial annual renewable policy premiums. Tthe policy premiums rise dramatically when you try to renew the policy.
Considerations
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Consider your purpose for the insurance. What you pay for your term policy is often a function of your age, your health and the type of policy you buy. The long-term costs of a level term policy are generally lower than the long-term costs of an annual renewable term life insurance policy.
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