Keep an eye out for how your premiums actually work.
A great way to get your family covered is by buying a really big quilt.
An even greater way to get your family covered is through the power of a term life insurance policy. How great are we talking? Well, it’s often cheaper than other, more permanent life insurance policy types. And it’s the most popular by far. But maybe you’re unsure. Maybe you’ve still got questions about the whole thing.
Questions like, “does life insurance expire at a certain age?” are valid. So we’re here to help. Check out our breakdown on term life insurance premiums and how they work over time.
- Types of term life insurance
- How are premiums calculated
- Does term life insurance increase with age?
- Are there ways my term life premiums could increase?
Types of term life insurance
Just like cheese, there are different types of term life insurance. We won’t bore you with all the details, but it’s important to know the types.
Level term
This is the most common type of term life insurance. Typically, you have the same premiums and death benefit throughout the initial period of the term.
Annual renewable term
The policyholder must renew their policy each year. After each renewal, the policyholder may see increasing premiums.
Decreasing term
Coverage (and death benefit) decrease over time, usually after each subsequent year.
Return of premium
A policy type that returns your premiums paid should you outlive the term of the policy. This type is generally much more expensive than other types. And it can be added to either decreasing or level term policies.
How are premiums calculated?
Premiums aka your monthly or annual payments, are determined by a number of factors— such as, age, coverage amount, personal and family medical history, lifestyle and job, among others. This information is collected during the underwriting process after you submit your application.
Because insurance companies can view risks in different ways, you may see different premium costs. That’s why we suggest shopping around and doing as much research as possible. When looking, you can compare the company’s payouts to your potential monthly payments. That’ll be a good indicator, as a high ratio of payouts to payments is ideal. You should also look at factors such as the financial strength of the company, how invasive and quickly their underwriting process could be.
Does term life insurance increase with age?
A level term life insurance policy keeps your monthly payments and payout the same throughout the length of the term (barring that you make no changes or alterations to your policy). Again, assuming all stays the same, you can expect your payments to stay the same during your policy term.
This is, in part, why insurance companies stress getting a policy when you’re younger and (possibly) healthier—that way you can lock in cheaper premium rates. Even a year delay in applying could mean higher premiums.
Are there ways my term life premiums could increase?
Even with a level term life insurance policy, there are ways you might see your premiums go up. For example, if you get a 10-year term life policy and decide you want to renew for another 10 years, you may face higher monthly costs. Why? Well, ‘cause you’re older. Higher ages are associated with more health complications or just shorter lifespans. So if you want cheap rates that don’t increase, applying early should help. And pick a term length that works best for you.
Alternatively, there are insurance companies, like Wysh, that allow you to adjust your coverage. If you want to increase your coverage amount, you’ll probably face higher premiums. But if you want to lower your coverage amount, you might see lower premiums. It all depends on what you and your loved ones need. If you aren’t sure how to calculate the right amount of coverage, click here for some tips.
