Why Is Term Life the Least Expensive Life Insurance?
If you are shopping for a life insurance policy you may have heard that term life offers the cheapest coverage.
There are Several Key Features That Make Term Life So Affordable:
Term Life is Temporary
Term insurance is a type of life insurance that provides temporary coverage lasting for a specific period of time. Usually, term life offers you the option of choosing a "Policy Term" lasting for up to 30 years.
However, you may be able to choose coverage lasting for a term of 10, 15, 20, 25, 30, 35, or 40 years.
The longer the policy term (duration), the higher your rate per $1,000 of life insurance coverage, because the risk is higher you may die during the longer policy term.
In addition, many people outlive the duration of their term policy, so there is no death benefit paid out on those policies.
Term Provides Pure Protection
A term insurance policy provides you with death benefit protection. That means, the only way you receive a benefit from your term plan is if you die during the life (policy Term) of your term life plan.
Term Life Has No Cash Value
Term Life insurance does not provide an investment feature, and there is no cash value that builds up in a term policy. You pay premiums for death benefit coverage only.
Level Term Life Insurance Offers the Cheapest Premiums
If you are searching out the cheapest life insurance policy available, you will want to look at term life insurance policies.
The least expensive type of life insurance policy judged by the size of premium payments and the cost of insurance is always going to be a term life policy. This is because term insurance has no cash value, and may expire before the insured is expected to pass away.
Term life coverage is not permanent, and insurance companies calculate that the chances of an insured person dying during the policy’s active years are lower if the insurance will only last for a limited period of time (up to 30 years).
Term Life is Only $10 Dollars a Month or Less for Some
The great thing about term life is that you can get coverage for only as little as a few dollars a month, depending on your age, gender, health, and the amount of coverage you need and the duration of your policy.
Many people can get a really good amount of life insurance coverage for a really affordable rate.
A policy for $250,000 of coverage may cost a 35-year-old male who is in good health about $10 a month.
When you compare that price to permanent types of life insurance, you can see that term life is by far the most affordable life insurance you can buy.
Group Life or Employer Offered Life Insurance
If your employer offers life insurance coverage as an employee benefit, it likely provides you some coverage for free. Normally, this amount of life insurance is limited to one or two times your annual salary.
While this is not usually enough insurance protection to satisfy all of your life insurance needs, it is a good base of life insurance coverage.
Keep in mind, if you leave your company, the coverage may not be transferrable to go with you once you are no longer employed
You may want to ask if you can purchase additional coverage at a group rate. If so, you might be able to add a significant amount of death benefit life insurance protection for a very reasonable price.
There is still usually a cap on the total amount of life insurance coverage, usually up to $250,000.
Your employee benefits administrator will be able to tell you more about the options available to you from your employer.
Oftentimes group life insurance gives you the best rates unless you are very young and healthy. Because there is no underwriting if you are in poor health, it is usually smart to take advantage of every dollar available to you through your group life or employer-offered life insurance program.
How to Get More Affordable Life Insurance
The best way to get the best deal on your life insurance plan is to follow some simple rules for saving.
Summary on Cheapest Type of Life Insurance
For the lowest premium payments, choose term life insurance.
And don’t forget, while your employer may not be able to offer you as much group coverage for life insurance as your family may need to replace your income and maintain their lifestyle, you should take advantage of your employer offered plan, as much as you can.
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