What Can I Expect to Pay for Life Insurance?
Life insurance pays a beneficiary in the event of the policyholder's death. There are a few types of life insurance and many factors determine the premiums people pay to get the peace of mind associated with covering funeral or burial costs and providing for their family.
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The Simple Answer
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According to CompuQuotes.com, a website that provides insurance premium information to consumers, the average life insurance policy is around $500 per year. This amount bypasses the numerous factors involved in premium determination and the types of policies sold and takes the mean dollar amount based on policies purchased over a period of time. This number may be right on target for you, or yours could be much different.
Types of Policies
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Two main types of life insurance policies exist. Term life and permanent life policies differ in several ways.
Term insurance is the most affordable because it accrues no cash value and provides money to take care of matters in case of your untimely death. Also, this type of policy is only good for a certain period of time -- the "term" of the agreement. There are some policies, known as "Return of Premium" that will refund the premiums if the client is still alive at the end of the term. Insurance companies are able to offer term agreements because they hope the people buying the policies will survive the term of the agreement.
Permanent life policies are good for the remainder of the individual's life and premiums accrue cash value over time, meaning the benefits can continue to take care of the family survivors long after the policyholder's death. Premiums may be higher because part of the money is going into what amounts to a savings account, but that money may be withdrawn at any time. -
Factors that Change Premiums
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Do you smoke? Are you overweight? Do you have a family history of cancer? Are you over 60? Answering yes to any of these questions could make your life insurance premium go up, and it probably will.
Are you a nonsmoker, nondrinker, an athletic type who exercises daily or a 25-year-old with no family history of major illness at a young age? If so, you will probably get a small break on your premium because you are considered a better risk.
Insurance companies determine premiums using lots of statistics, but the truth is the final calculation isn't likely as complicated. These companies need to cover operating expenses, planned profits and the cost of the predicted "losses" that occur when they actually have to pay off a policy's benefits, according to Financial Web. With policies grouped with others in similar risk categories, they are able to come up with a number to be charged for the policy in order to remain in business should they have to pay it off.
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