When shopping around for a life insurance policy, you may be overwhelmed by the options available to you. Understanding how much an average life insurance policy costs is a step in the right direction. Here’s everything you need to know about the premiums you’ll come across in your search:
Types of Life Insurance Policies
1. Term: the most basic policy type. It provides coverage for insureds over the course of a specified term, usually 10, 20, or 30 years. This is the most affordable option, for those looking to get coverage.
2. Universal: for people who want permanent life insurance, but don’t want to pay too much in terms of premium. Your premium covers both your insurance policy and a portion of it defers into a cash value. As a result, this cash value grows over the course of the policy’s lifespan. These premiums rise steadily as the policy matures and that cash value helps offset those costs.
3. Whole: for people who want permanent life insurance, but don’t want the risk attached to universal policies. Because of this guarantee, you’re almost certainly going to pay more for your premiums. It is the ideal policy for someone who wants to use a life insurance policy as an investment vehicle.
4. Indexed Universal: takes the principles of a universal life policy’s cash value component, but instead invests that cash value into indexed funds. These indexed funds are similar to mutual funds, and the money grows in a similar fashion. But there’s also a cap on how much a policy can gain and lose from these funds.
5. Flexible/Variable Universal: Variable universal life insurance policies, on the other hand, are even more volatile/risky versions of an indexed universal policy. Instead of indexed funds, part of the premiums go in the stock market as an investment, and there are no limits on what the insured can gain or lose. As with anything associated with the stock market, this is a risky investment in terms of life insurance.
A number of factors come together to determine your classification, so here’s quick a peek behind that curtain:
Age
The older you are, you’re likely you are to pay more for your policy.
Gender
Statistically, women live longer than men, which means that life insurance premiums for men tend to be more expensive.
Build
Insurance companies take your height and weight into account when determining your policy class.
Medical History
Your family medical history and your prescription history help insurers calculate the risk of covering you.
Prescription History
Your history of prescribed drugs and medicine also contributes to your assessed risk by an insurer.
Lifestyle
High-risk hobbies, like skydiving or base jumping, that carry a high risk of death are likely to affect your policy class.
Financial History
Your credit history also goes a long way toward calculating your risk to an insurer.
Nicotine Usage
On average, smokers pay 2-3 times more for life insurance than non-smokers
Driving/Arrest Records
Reckless driving, DUIs, and arrests on your record stand to negatively affect your classification, as well.
Taken together all of this data helps insurance companies understand how much of a risk you are to insure. Your classification then goes into determining how much you pay for your premiums.
Call Cosmo to get a free life insurance quote today!
Cosmo Insurance Agency is an independent insurance agency serving surrounding communities in New Jersey. Cosmo keeps its promise to assure an efficient and creative approach to the services we offer. Each of our clients experience a personalized and long-term relationship with us. Our New Jersey based team of health brokers guides our clients in helping them choose the most cost-effective options. By incorporating the latest in technology-based tools and laws on healthcare, employee benefits, life insurance and finance, we keep our clients up-to-date with the plans that encompass all of their needs, whether it is individual or group insurance.
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