You want to know your family will be taken care of if you suddenly were no longer there. It’s not easy to think about tragedy. You want to get a policy, but aren’t sure where to start. Understanding how life insurance works will let you make the best decision. We’ll discuss what life insurance is and how much you’ll pay for coverage.
What Is Life Insurance?
It’s a financial agreement between you and your insurance company. You pay a premium. The company agrees to pay your beneficiaries should you die. You create the death benefit which determines who gets the resulting payout.
How Does Life Insurance Work?
The most popular form of life insurance plan is the term life plan. This normally covers a 20-30 year period but can be shorter. Less popular whole life coverage plans are more expensive, but can be borrowed against once they’ve built up decent cash value.
What Do You Pay For Life Insurance?
Premiums are different for everyone. There are a multitude of factors that affect how much you pay. Agencies can obtain medical records and will often ask you to take a physical to determine coverage. According to national averages, a 40 year old male, non smoker, on medication for high blood pressure will pay around $355 annually for a 20 year, $500,000 policy. A 40 year old woman on medication for high cholesterol will pay around $496. Yet with a clean bill of health, she’ll pay $305. Anything related to life expectancy can be considered. Here are the most common factors for deciding your premium.
Sooner is better when it comes to life insurance. Premiums get higher with age. The logic being that the company expects a younger person to live longer. Shopping early before you pay more is a good idea.
Women statistically live longer than men. Insurance companies know this. Women will pay less for the same policy than a man of similar age and health.
Tobacco users pay nearly double the premiums for most plans. With the medical problems associated with it, insurance companies have less trust in your long term health and charge you more.
– Medical History
High blood pressure, high cholesterol, type 2 diabetes, and other medical conditions will lead to higher premiums. While any recent treatment for a heart disease can deny you coverage. Exercising often can actually help you can save on your life Insurance!
– Family History
Does your family have a history of cancer or heart disease? If so, expect to pay more.
– Driving record
A history of dangerous driving will cost you. DUI charges greatly impact what you pay for a policy. Motorcycle riders will also face higher costs.
Loggers will pay a lot more than a librarian for the same coverage. Dangerous jobs are considered high risk for companies.
It’s important to remember that insurance agencies are for-profit companies. They are in the business of making money. Agents work on commision which can influence the kind of policy they recommend. Companies also have the right to conduct their own investigation before paying out. Expect them to gather information whenever you make a claim.
Do you need Life insurance? Understanding how life insurance works will help answer that. If you have a family and want them covered, buying early is best way to keep costs down as rates go up over time. If you smoke, now might be the best time to quit.