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Life Insurance Rates

Life Insurance Premiums

Life is filled with the unexpected. To be there to care and provide for one’s family is one of life’s treasures. However, even in the best situations, there will come a time when our lives end. Death is as much a part of life as living and preparing for it is one way to assure that the family remains provided for afterwards. A life insurance policy is an important part of these preparations. Although many find the process of acquiring life insurance distressing, it is a necessary part of assuring that final preparations are made. Purchasing life insurance begins with locating a company that can meet your needs. Depending on the policy, a physical may be required. Both term and whole life insurance policies are available.

Term or Whole Life Policies

For those searching for a way to provide for their loved ones following their death, there are two types of insurance policies that are offered, term and whole life. Though term and whole life insurance are different, they both are a means of relieving the financial burden of one’s death from loved ones. A term life insurance policy is paid over the life of the individual who is insured. The value of the policy is paid to the beneficiary upon the death of the insured. Individuals may purchase term life policies for one year up to 30 years. A whole life insurance policy combines the benefits of term life insurance with an investment. The cash value of a whole life policy grows over time. The insured may also borrow against it. A whole life policy offers the advantage of being able to secure a monthly premium that doesn’t increase over the life of the policy. However, the premiums for whole life insurance are usually more expensive than those of term policies.

Life Insurance Rate Class

Rate class is the system used by most insurance companies to establish if an individual is eligible for a life insurance policy. It is also used to determine the amount of coverage an individual may receive. The life insurance company uses information from the individual’s medical exam to arrive at their rate class. This and other factors, including the individual’s lifestyle, are used in assessing their risk of death. People who are in good health and live a healthy lifestyle have a lower risk of dying. Therefore, healthy individuals typically have lower insurance premiums.

Rate class descriptions used by insurance companies include Preferred Plus Class, Preferred Class, Standard Class and Substandard Class. The Preferred Plus class includes people in excellent health. These individuals do not smoke or indulge in drugs or alcohol or engage in risky hobbies or employment. Those people in the Preferred Class are healthy but may occasionally consume alcohol. People who experience minor health problems such as those associated with smoking or obesity are grouped in the Standard Class. The majority of life insurance firms consider the individuals in this category to be in poor health. The Substandard Class is comprised of people with extremely poor health that present a substantial risk for the insurance company. Many times an individual in this class will pay extra fees, higher premiums or both when purchasing life insurance.

An Example of the Rate Class System

A 40 year old, male, non-smoker would be classified as either Preferred Plus Class or Preferred Class by life insurance companies. This person has the ability to acquire a 20 year life insurance policy valued at $500,000 for a monthly premium of $35. If this same individual were to acknowledge that he smoked or experienced adverse health effects, his life insurance payment would increase by 80 percent.

Lowering the Cost of Health Insurance

It is possible to lower one’s life insurance costs by making a few healthy life style changes. Individuals should evaluate their state of health prior to applying for a policy that involves a medical exam. People can control their weight and lower their blood pressure by maintaining a healthy diet and participating in regular exercise. Obesity is one of the leading causes of death and is a determining factor in the cost of life insurance. Those who smoke can join a smoking cessation program. Refraining from participating in risky or dangerous activities will also positively impact life insurance premiums. Making small changes such as these can significantly lower the cost of life insurance.