Affordable Life Insurance Protection for Your Family

How Is Life Insurance So Cheap?

Find Out How Life Insurance Is So Cheap

If you are shopping for life insurance or you’ve purchased a policy you may be wondering how it is that life insurance companies can offer you coverage so cheap.

For example, some plans offer up to $250,000 of life insurance for just $15 per month which is 50 cents per day.

Well, there are several reasons life insurance is cheap, especially compared to what you may be spending a whole lot more on each month, and getting much less in return, other than adding to your waist-line, ha-ha.

But seriously, many of us spend up to $100 or more each month on our daily coffee or doughnut fix, or on fast food or all of those little things we enjoy so much, but add up quickly.

And, maybe we haven’t taken the time to get life insurance because we think it will cost too much. But, those of us who have compared pricing online know that’s not true.

Actually, life insurance is cheap, really cheap. In fact, most people believe it will cost 2-3 times more than it really does.

Example of Cost of Life Insurance

A man age 40 can get $250,000 of 10-year term life insurance for under $16 per month.

A woman can get $250,000 of 10-year term life insurance for under $12 per month.

But, how can life insurance companies charge so little for so much protection?

Well, insurance companies pool the premium payments of thousands of policy owners and they invest that money in safe, secure investments, and they make money from those investments, and pay out the claims from the interest paid on their investments, and the excess premiums.

The fact is many people buy life insurance but they may end up either forgetting to pay the premiums at some point in time and having their life insurance coverage cancelled for non-payment of premiums, or they choose to cancel their policy after a certain number of years for any number of reasons.

In addition, many people may outlive the duration of their life insurance plans.

So, that means, many life insurance policies do not end up paying out a death benefit because they are no longer "In Force" when the insured person dies.

The bottom line is this: If you need life insurance to provide protection for the financial security of your family’s future, it can be much cheaper than you might expect to get the coverage your family needs and deserves.

For less than the cost of your daily cup of coffee you can provide guaranteed financial security for your loved ones and have peace of mind knowing they will be able to maintain their lifestyle, and live a happy life pursuing their dreams, in case you are no longer there to provide for them.

Yes, life insurance is cheap, and you can find out how cheap it really is by requesting a FREE Quote right now.

Top Pick – JRC Insurance Group

JRC Insurance Group helps you shop, compare and save on life insurance. Regardless of your age or health background, we’ll shop our 40+ insurance companies and find you affordable life insurance you need to protect your family and fit your budget. Compare the best life insurance rates for savings up to 73%. Get Your FREE Quote

Why is Term Life Insurance So Cheap?

Term life insurance is cheap because it only pays out if death occurs during that period of time covered by the duration of the policy term.

The lower your age, the lower the actuarial risk of you passing away during your policy term, the lower the price you pay for your life insurance coverage.

To get a life insurance policy that will be assured to last to the end of your life, the premium may be reasonable, but not necessarily cheap compared to term insurance. Knowing it will be there for your loved ones at the time of need can definitely make it worth the cost, but permanent life insurance costs a lot more than term life.

That is not to say there isn’t a need for cheap term life insurance.

Term and Permanent life policies are options so that coverage is available and affordable for nearly anyone who wants it, whether you need life insurance for 10 or 15 years, or your entire lifetime.

As long as you didn’t lie on your application or commit suicide, the insurance company will pay out a claim made on your policy upon your passing.

It is not cheap for everyone to get term life. If you are young and healthy, pricing can be very cheap.

The price of life insurance is based mostly on your age, gender, whether you smoke and your health.

The chances of a young, healthy person dying within the next 10 or 15 years is so small that an insurance company can afford to let them pay around $20 a month for up to $500,000 of term insurance.

If the rates seem way too good to be true make sure there are no exceptions, waiting periods, or that its really life insurance and not just an accidental death insurance you are being offered for the low price.

Life insurance rates are based on several factors, including:

Age, Gender, Type of Policy, Amount of Coverage, Tobacco Use, Health, Lifestyle, Occupation, Hobbies, Driving Record, Credit History, Height-to-Weight Ratio, etc.

The Cheapest Types of Life Insurance

Term insurance and accidental death insurance are the cheapest types of life insurance plans available.

Term Insurance is cheap. Term life insures your life for a fixed "term" (duration). If you die during the term, the insurance company pays out a claim – death benefit – to your beneficiary. If you survive to the end of your term life policy term, there is no pay out on the policy.

Accidental Death Insurance covers specific causes of death that are accidental, not natural causes or intentional acts. If an insured person dies as a result of a covered accident, the death benefit is paid out to the policy beneficiary.

Whole Life Insurance is where you keep paying the premiums and they’ll pay out a death benefit upon the passing of the insured person whenever the death occurs. This is a lot more expensive because eventually the insurer is going to have to pay out a death claim on the policy.

Term life insurance is cheap because the loss ratio (amount paid out versus the amount taken in "premiums") is usually only around 10%-15%.

So, for every dollar in premium the insurer takes in, they only pay out around a dime. This means they can provide a lot of coverage for a reasonable price.

Term Life Insurance Is Way Cheaper Than You Think

Eight in 10 adults overestimate the cost of a 20-year, $250,000 term life insurance policy for a healthy, non-smoking 30-year-old. That’s according to the 2015 Insurance Barometer Study by life insurance industry group Life Happens and LIMRA, a life insurance industry research organization.

Compare Term Life Insurance Quotes

Estimated Costs According to Those Shopping for Life Insurance

The median estimate of the cost of life insurance by consumers ages 25 and older was $400 a year, while the median estimate by adults younger than 25 was $600.

The average estimates were twice as high as the actual cost of coverage. One in four respondents guessed that such a life insurance policy would cost at least $1,000 per year.

According to NerdWallet research, a 30-year-old, non-smoking man can buy a 20-year $250,000 term life policy for as little as $157 per year.

A 30-year-old non-smoking woman can get the same coverage for as little as $139 per year.

Why So Cheap for Term Insurance?

Term life insurance pays your beneficiary in the event of your death. Coverage is cheap when you’re young and healthy for a couple of reasons: Temporary Coverage and No Cash Value.

First, term life is temporary protection for a set period of time. Term policies pay out a death benefit only if you die within the term period you choose – typically five to 30 years.

Term life policies are usually inexpensive when you’re young because life insurers doubt you’ll die within the duration of your policy.

Second, unlike permanent life insurance, such as whole life, term insurance has no investment component. You can’t withdraw or borrow money from the term policy. Once your term expires, the coverage ends, and the insurance policy has no value.

Why Buy Term Life Insurance

Term life insurance provides your family a financial safety net if you die. It’s the most inexpensive type of life insurance and is sold by many of the top life insurance companies.

If you have friends or family members who depend on your income for financial support, then you probably need life insurance coverage.

It’s best to buy coverage sooner rather than later. Rates go up every year as you age and develop health conditions, such as high blood pressure or unhealthy cholesterol levels which may shorten your life expectancy.

Term Life Insurance Funding Explained

Term insurance is a low-premium life insurance product.

A minimal amount of term insurance premium dollars needs to go toward funding the death benefit of a term life policy, because a significant portion of the premium calculation resides in the payout ratio or probability of loss – death of the insureds.

Sure, life insurers need to account for the usual mortality costs and risks of loss, but the truth is that most people outlive their term policies. That’s a big reason why insurers can afford to offer low premiums on term insurance.

Another key factor contributing to low term insurance premiums is the fact that the insurer doesn’t need to provide a cash value for the policy. There is no cash value inside a term policy, it does not build cash value, it is not an investment, it is "Pure Protection".

With insurance products like whole life insurance, the insurance carrier must set aside a significant portion of the paid premiums as a reserve to pay for the future death benefit payout, and that death benefit will be paid if the insured continues to pay premiums until he or she dies while the insurance policy is "In Force".

A third reason why term life has gotten even cheaper is because many people are living longer today. This means that the policies that insurance companies are issuing today are being targeted at a population with a lower probability of death within the "sweet spot" of the term life insurance market – people age 30 to 45.

So, you get to pay less for term insurance coverage because people are generally living longer lives than in the past.

Level Premium Funding of Term Insurance Policies

Level premium funding also helps lower the cost of term life insurance. With the most basic type of term insurance, annual renewable term life, you pay premiums for one year, and the insurer only charges you one year’s worth of death benefit coverage for your policy.

On your policy anniversary, the insurer re-calculates your risk of death and increases your insurance premium to reflect your older age and increased risk for the insurance company to insure.

With level premium funding, the life insurer collects premiums in excess of the one year cost of life insurance and then guarantees a death benefit coverage for a period of 10, 15, 20 or even 30 years, as long as you continue paying the premiums due for the entire length of the policy term.

The insurance carrier invests the excess premium, and uses the investment interest and the excess premium to hold down the rising cost of term insurance policies.

As life insurers have gotten better at investing and diversifying their investments, they’ve been able to lower premiums of term policies, and continue to do so.

With term insurance rates decreasing over the years, term life protection has become the choice for many families, as a cost-effective way to buy life insurance and provide protection for loved ones.

Use our term life insurance quote tool to compare rates and find affordable life insurance.