Finding the Best Term Life Insurance Rate

For many families, term life insurance is a cost effective way to provide financial protection and stability. To find the best term life insurance rate, first identify the length of the term, or the number of years the policy needs to be in force. Next, determine the value, or death benefit, that is to be paid to the beneficiary or beneficiaries upon the death of the insured. For example, a 35-year-old with a five-year-old child may want to consider a 20-year term policy that not only enables his or her spouse and child to maintain their standard of living, but will also provide enough money for the child’s college education. Finally, understand the risk factors that contribute to the cost of the monthly premium and work to reduce as many of those risk factors as possible. The best term life insurance rate will be the one that meets both the future financial needs of the beneficiary or beneficiaries and the current financial resources of the insured.

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Factors that Affect Term Life Insurance Premiums

Life insurance companies use three main criteria to determine the amount of the monthly premium of a term life insurance policy:

  • The length of the term
  • The value of the policy
  • The risk factors of the insured

Term life insurance policies are sold to the insured for a set amount of time, which is known as the defined term. If the insured dies before the end of the term, the insurer pays the beneficiary or beneficiaries the value of the policy. If the insured does not die by the end of the term, he or she can usually renew or convert the policy, depending on his or her age and overall health. Term life insurance policies are normally issued in five-year increments for up to 30 years. Under most circumstances, the longer the term, the higher the monthly premium.

The value of a term life insurance policy is the amount the insurer pays the beneficiary or beneficiaries upon the death of the insured. Values can be as low as $5,000 and as high as $2,000,000.  In general, policies with higher values are more expensive than those with lower values.

Underwriters assess risk factors of the insured such as age, overall health, medical history, family medical history, occupational hazards, and lifestyle choices. Risk factors allow the life insurance company to evaluate the statistical probability of paying a claim.  For example, medical conditions such as obesity, heart disease, diabetes, hazardous occupations such as Alaskan king crab fishing, and lifestyle choices like tobacco use, excessive alcohol use, and participation in dangerous sports like mountain climbing, will all likely result in a higher monthly term life insurance premium.

How to Reduce the Term Life Monthly Premium

One way to reduce the amount of the monthly premium of a term life policy is to reduce the term. For example, a 35-year-old with a working spouse, significant assets and a five-year-old child may decide that a 15-year term policy is sufficient to provide his or her spouse and child with the resources needed. Not only will reducing the length of the term reduce the monthly premium, it will reduce the number of years the monthly premium will be paid.

Reducing the value of a term life policy will also reduce the monthly premium. While determining the amount of insurance needed is a uniquely personal calculation, it’s best to start with the minimum value needed. Assessing the actual needs of the beneficiary or beneficiaries will help to determine the actual amount of coverage needed. While some families will need the value of the policy to cover day-to-day living and schooling expenses for many years, others may only need the benefit to cover funeral and burial costs.

While an insured has no control over his or her family medical history, one of the best ways to minimize the monthly premium (and increase overall health) is by working to reduce or eliminate individual risk factors. By having a complete physical prior to applying for the policy, the insured will be able to provide the insurance company with the most up-to-date health information, such as height, weight, blood pressure, blood sugar levels, cholesterol levels (both HDL and LDL), and potentially dangerous elevated liver enzymes due to excessive alcohol intake.

To reduce or eliminate risk factors, consider the following:

  • Quit smoking and the use of all tobacco products - Monthly premiums on most policies are reduced when the insured is tobacco-free for 12-36 months
  • Avoid excessive alcohol intake
  • Improve overall health by getting more exercise and losing weight if necessary

Some insurance companies will also reduce the monthly premium of a term life policy if the insured has regular visits with health care providers, a clean driving record, and a good credit score. In addition, it’s possible to reduce the premium by paying on an annual basis rather than monthly, or by paying through direct withdrawal from a bank account rather than paying by check or by credit card.

Finally, compare as many companies and as many policies as possible online. It has never been easier to find the best term life insurance rate. All of the major life insurance carriers and policy comparison services now offer term life premium calculators online. On most sites, all that is needed for an initial quote is the insured’s age, sex, overall health status and the term and value of the desired policy. If the insured is young, in excellent overall health and has no major risk factors, choosing a company that requires a health exam before issuing the policy is finalized is likely to result in a lower monthly premium. While a policy that does not require a full physical may be appropriate for some, it will be more expensive.

The best term life insurance rate will differ for each individual insured. But by selecting the right term and value, and by reducing risk factors, each should feel comfortable that he or she has received the best term life insurance rate available.

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