Term life insurance prices
Term life pricing is generally based on:
- Height and weight (BMI)
- Any current health conditions, such as high blood pressure
- Certain health conditions of your parents and siblings, such as cancer and heart disease
- Dangerous hobbies, such as sky diving
- Other factors correlated to life expectancy (called mortality by life insurers), including your motor vehicle record, credit and recent bankruptcies
If you're shopping for life insurance, know that quotes will go up every year you wait.
Types of term life insurance
|Annual renewable term life||You have to renew this policy every year, and rates increase each time. It's best for people who need to fill a temporary life insurance gap.|
|Level term life||You lock in a set rate for the duration of the policy, so your payment is "level."|
|Return of premium term life||If you outlive this policy, the premiums you paid are refunded. You'll pay at least 30% more for this feature, according to Trusted Choice, a trade group for agents. Not many of these policies are sold.|
Who needs term life insurance?
Term life insurance is good for people who want life insurance that covers a specific financial obligation or time period. For example, you may want term life insurance to cover:
- The amount and years of a mortgage
- The years until you retire, as "income replacement" in case you die
- The years until children graduate college, to cover college expenses
Term life insurance is not the right type of policy for you if:
- You want your beneficiaries to receive a payout no matter when you die
- You want to provide life insurance funds for a funeral no matter when you die
- You have a financial obligation that will continue past your lifetime, such as supporting a special needs child
How to buy term life insurance
Choose an amount that's close to the total of the financial obligations that you want life insurance to cover, such as a mortgage amount, college tuition and/or your family's living expenses.
Choose how long you want the policy to last, typically 5, 10, 15, 20 or 30 years. Make sure the term length covers your longest financial obligation. For example, if you have 17 years left on a mortgage, choose 20-year term life.
Compare quotes from at least a few companies. Quotes are free and easy to get after answering several questions about yourself and your health.
Check the companies' financial strength ratings from A.M. Best or Standard & Poor's. These ratings indicate the ability of the insurer to pay claims, and you want a financially strong company. Most insurers put their ratings on their websites, or ask your insurance agent.
Consider riders. Life insurance riders are additions to the policy that add coverage or features. For example, a "disability waiver of premium" rider forgives your premiums if you become totally disabled but keeps the policy in force. Each rider will add cost, and not all are worth it.
Find out if the policy will have an accelerated death benefit rider. An accelerated death benefit rider lets you access part of the death benefit if you become terminally ill. It's often already included or available for a small cost. It's worth asking if your policy has it.
Ask if the policy is convertible to whole life. A convertible life insurance policy lets you convert term life to permanent life without showing that you're in good health. You generally have to make the conversion within a specified number of years after buying the policy. It's good to find out if the policy has this option.
Set your own expectations. It can take a month or more for a life insurance application to be issued. Some companies offer "accelerated underwriting," which shortens this time, especially if you're young and healthy. If you're impatient, ask your agent if you qualify for any accelerated underwriting policies.
Start an application when you have a quote and company you like. You might be asked to take a life insurance medical exam, which you can do at home. The life insurer pays for the medical exam.