The Cost of Life Insurance

(4 of 7)

The Cost of Life Insurance

Life insurance premiums vary a lot; ultimately, they are based on actuarial tables that project your life expectancy. Your risk as a covered person is also taken into account. If you are high risk—meaning you smoke, are obese, or work in a dangerous field or have a dangerous hobby—those risks will be factored into the premiums you pay. If you want to pay less for a policy but you are high risk, you will need to remove or lessen those risks.

What else matters?

Other factors that go into the price you pay for a policy include how much insurance you buy, whether it is term or whole (or some variation of these, such as universal, variable, accidental death and dismemberment, etc.), the amount of commission built into the policy, and the financial health of the insurance company.

Term vs. whole

Term life insurance costs less than whole life (although it rises over time and can eventually require higher premiums than whole). A group term life insurance plan offered by an employer is less expensive than an individual plan, because the cost and risk can be spread among several people. You will be covered as long as you are employed there; when you leave, you might have the option to convert it to a whole life policy.

Plan carefully

You should budget for your insurance premiums so that you do not lose coverage due to an inability to pay your premiums.