Do Term Life Insurance Premiums Increase?
What are Life Insurance Premiums?
Life insurance premiums are essentially your subscription to an insurer for coverage. As long as you pay your premiums, they will pay your death benefit to your beneficiaries when you die. Different insurance products may have more or less expensive premiums depending on the features of your coverage. Permanent policies are more expensive because they include a cash value component that grows tax deferred as you make payments. A portion of every payment goes into your cash fund, while the rest covers your cost of insurance. Term life insurance is more affordable because there is no cash value, and because there is more risk with a policy that could expire while you are still alive.
Premiums are calculated based on your life expectancy and the coverage you are shopping for. Life expectancy is determined by factors such as your age, gender, preexisting health conditions, medications you are on, drug use, and if you have a high-risk occupation. These factors, along with the type and amount of coverage, all go into determining your premiums. If you are younger and in good health, you will pay less. As you age, your premiums will increase. There are some health conditions or occupations that may disqualify you from certain types of coverage, in which case you may consider a guaranteed issue or no-exam policy.
While guaranteed issue policies can be simple and are often affordable, they may not offer you the protection you’re looking for. If you qualify for traditional term or permanent coverage, you may want to explore those options first. Term protection is generally the most affordable option, because 100% of your premium is going towards the cost of insurance. Permanent policies are more expensive, but they accumulate a cash value that can be accessed during your lifetime.
