When we hear the words Term Life Insurance, we associate it with being the most affordable Life Insurance in the market today. But that’s all we know, and we want to dig deeper into how this works, what’s the coverage, and its security. So we go online and look for more resources to get us informed to make a better decision.
The easiest way to get details about Term Life Insurance would be to ask for a quote from a Licensed Insurance Agent. However, some quotes are not favorable or as expected by the clients.
Factors that Increase Premiums for Term Life Insurance
Several factors may increase the premiums for Term Life Insurance. One of these is the client’s general health condition. Online quotes may not be accurate until the insurance company reviews health conditions. Only then will you learn the actual cost of your Term Life Insurance.
Most insurance companies require their clients to have a medical examination to get the cost of their policy appropriately. Not all policies have the same premium payments; each is dependent on some factors laid out by the insurance company. Insurance offered as benefits by employers may not need a medical examination; however, this insurance does not go with you. When you leave your company, the policy is also terminated. Also, insurance offered by employers only provides minimal coverage. It is still practical to purchase your own insurance policy to secure the future of the loved ones you will leave behind when you pass away.
Life Insurance companies will benefit more if most of their Term Life Insurance clients are in perfect health conditions. This means policyholders have better chances of living a long life, thus outliving the term of their policy. As such, insurance companies will not be liable to pay the death benefit to the policyholder if that happens. This suggests an income on the insurer, as they get to keep the premium payments without shelling out money to the beneficiaries.
There are classification methods used by Insurance Companies to properly figure out how much should be the insurance cost and premium payments for each policyholder. Policyholders who have high scorecards for their health conditions usually get the lowest premium payments. Considering other factors, the lower the score, the higher the premium payments will be.
It is necessary to know that insurance companies do not only take into consideration the result of medical examination but as well the medical history and affiliations of the client. A client will be flagged as having poor health condition if they are smoker, obese, have high levels of sugar, cholesterol, and blood pressure. A family history of chronic illness is also considered because although the client does not manifest any signs of illness, these are mostly inherited by genes, and the probability of having the disease in the later years is high. Some of these chronic illnesses include diabetes, cancer, and heart diseases. These conditions will pose a higher premium payment because if the policyholder dies within the term of the policy, the insurer is bound to pay the death benefit to the surviving beneficiaries.
Another factor that raises the premiums of a Term Life Insurance is the age of the client. The younger the client, the lower the premium payments. This is because there is a higher chance that the young policyholder will outlive the policy. An example will be a 20-yr old client, buying a 30-yr Term Life Insurance. This means that at the end of the term, the policyholder is still 50 years of age. The average life expectancy as of 2019 is 70 yrs old. The higher the chances of a policyholder to be still alive at the end of the term of the policy, the more income for the insurance company.
That being said, if a client is 30 or 40 years old, their Term Life Insurance premiums are expected to be higher than that of 20 years old. Age may be just a number to some, but for insurance companies, this is an essential factor in determining the cost of an insurance policy.
Term Life Insurance companies now offer riders or options to their clients. Because term life insurance, as the name suggests, is the very basic insurance that provides coverage for a specified term with no cash value. Insurance riders offer additional protection and benefits to the policyholder to maximize their purchase. However, this also comes with an additional cost to the policy. Below are some of the riders that most policyholders add to their term life insurance policy.
Return of Premium Rider
Young clients, non-smoker at the onset of the policy, have higher chances to outlive their policy. The return of premium rider is offered to them so they can get a full refund of their premium payments at the end of the term if they outlive the term of their policy, tax-free. This gives the policyholders a cash value for their insurance. However, if death comes first before the end of the term, the surviving beneficiaries will still get the death benefit as stipulated in the policy.
Adding a Conversion Rider to your Term Life Insurance gives the policyholder the option to convert the Term Life to Permanent Life Insurance. Young individuals would prefer to buy Term Insurance because of its affordability. However, as they grow old, priorities and needs change as well. Policyholders may think that it is more beneficial to them and their families to have Permanent Life Insurance than a Term Life Insurance. Having a conversion rider attached to the policy allows the policyholders to convert their policy without taking another medical examination and further review of the current condition of the policyholder.
Critical Illness Rider
Since Term Life Insurance does not have a cash value, adding a Critical Illness rider to your insurance provides a living benefit to the policyholder. The insurer is bound to provide a cash benefit to the policyholder when diagnosed with a critical illness. This is very helpful to cover medical expenses and to sustain daily needs if unable to work.
Critical Illness includes cancer, heart disease, and serious diseases that may lead to death.
We Are Here To Help
Given the factors and conditions discussed in this article, it is best to talk to a Professional Insurance agent so help you identify your needs. This way, you will have a better understanding of the best insurance policy that you should get where you can get the maximum benefits based on your condition and future needs.
To find out more about Term Life Insurance and to get a free and confidential quote, call the professionals at BBIFinancial at (800) 958-1525 during normal business hours or contact us through our website www.BBIFinancial.net for more information.