Buying life insurance is kind of like getting a cavity drilled and filled. You know you need to, but that doesn't mean you have to like it. Still, buying enough coverage to protect your family is one of those things that responsible adults do. The good news is that term life insurance is one of the financial industry's greatest bargains. There are a lot of factors that can affect your premiums, but it's not hard to find coverage for a reasonable amount.
Term Life Basics
Term life insurance is a very straightforward product. The company agrees to pay out a set amount of money if you die while the policy is in force. The younger and healthier you are, the less likely the insurer will have to pay. That means premiums can be very low indeed, during exactly the kids-and-mortgage years when you need coverage the most. You can buy the coverage in terms up to 30 years, although five or 10 years is more common. Most policies allow you to keep renewing until age 65 or 70, regardless of health, although your premiums eventually become prohibitive.
Although it often seems the cost of everything is going up, term life is one of the rare and welcome exceptions to this rule. For one thing, medical advances have made it a whole lot harder to die prematurely. Between trauma centers, improved diagnostic technologies and new medications, people often survive accidents or illnesses that would have been fatal just a few years ago. In addition, the Internet has made it possible to compare policies from hundreds of companies in minutes. Previously, you would expend hours sitting down with multiple brokers to get the same information.
The basic cost of term life coverage varies with age, gender and health, but it's possible to generalize. For example, Paramount Life estimated the average cost of a life policy at $500 per year in April 2012, but it can be much lower. That same month, online term-coverage comparison tools showed rates as low as $100 annually for $250,000 of 10-year term on a 28-year-old nonsmoker. In practice, relatively few applicants qualify for that especially low rate. Depending on the coverage you need, your premiums might reasonably be in the $250 to $300 range.
There are a number of factors that affect the cost of your coverage. You'll pay more at 30 than at 20, and women usually pay less than men because they live longer. If you're unusually fit and come from a long-lived family, your rates will be lower. If your family history is shaky and you're carrying more weight than you should, your rates would be higher. The amount of coverage you apply for is also a factor. Higher benefits equal higher premiums, but it helps to know where the break points are. It's sometimes possible to double your coverage for just an extra few dollars a month.
Fred Decker is a trained chef and certified food-safety trainer. Decker wrote for the Saint John, New Brunswick Telegraph-Journal, and has been published in Canada's Hospitality and Foodservice magazine. He's held positions selling computers, insurance and mutual funds, and was educated at Memorial University of Newfoundland and the Northern Alberta Institute of Technology.