21 June 2013 0 Comments

Not All Premiums Are The Same

compareAt age 40 you have decided it’s time to get your life insurance program in place.  You are about to buy a $500,000 term life insurance policy.  You have decided this is the correct amount after taking into consideration current insurance, other assets and your wife’s earning ability.  You want to get the best deal possible and are talking to a broker who has the ability to access the most competitive companies in the term marketplace.

What are your premiums apt to be?  You’ve already determined the amount, so there are only two other factors that need to be taken into account:  the duration of term and the underwriting class at which you will be accepted.  Assuming you are a male (female premiums would be less) living in the state of California, here are the annual premiums you might be offered from various insurance companies:

underwriting class

 

 

The first thing that probably hits you is that the 5 year term costs more than the 10 year term.  How could that be?  The company offering the 5 year term isn’t that competitive for other durations and those with the best 10 year rates don’t even offer a 5 year plan.  So, don’t bother with a 5 year policy.  Next, the difference in premiums between the 10 year and 15 year plans is not great, so if the need extends beyond 10 years it makes little sense to settle for anything less than the premium guaranteed for 15 years.

Of course the other thing that might be shocking is how different the premium can be for the same term duration based on the Underwriting Class.  The 20 year term premium ranges from $350 to $2, 045.  That’s why you can’t be drawn in by a commercial that touts a $350 premium.  Will you be able to qualify for that price?  Maybe, but you need a good agent who will help determine what company will offer the best premium based on your health, habits and family history.

Coming up I’ll make some interesting comparisons at age 65.

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