The Actual Cost of Term Life assurance

The Internet has lots of data about the benefits of life insurance, but few websites tell how much life insurance in effect costs. Each year, however, Insure.com surveys 25 foremost insurance companies--those with A.M. Best company ratings of A++ or A+, called "Superior," and those with ratings of A or A-, thought about "Excellent"--to find the bottom rates available for level term life insurance by age and gender. The most recent eye was taken on November 12, 2007 and published on the website three days later. The results were positive for consumers: The price of life insurance continues to decline.

Part of the reckon for the decline is competition. Websites that offer price comparisons are causing insurance companies to lower their prices to compete. It is a variation on the theme of the "when banks compete, you win." When insurance companies compete, you win, too. The Internet has also helped by automating--and thus lowering the cost of-the application process.

California Sky Diving

Another reckon prices are falling is the declining death rate. The age-adjusted death rate in 2004 was 800.8 deaths per 100,000 people, a decrease of 3.8 percent from the 2003 rate and a the bottom recorded U.S. Figure. Fewer deaths mean the insurance companies pay fewer death benefits. This reduces costs and gives the insurance companies more time to earn more revenue from the premiums paid into the system. Some of the extra revenue goes to the bottom line, improving profits, but some revenue is plowed back into operations, allowing the companies to lower their rates.

The Insure.com eye included 10-, 20-, and 30-year level term life insurance policies with three favorite death benefits: 0,000, 0,000, and ,000,000. The eye assumes the buyer is in ideal health, meets stringent guidelines for height-to-weight ratios, and does not partake of any risky activities, such as skydiving, motorcycle racing, or mountain climbing. To keep the eye simple, it focused on rates in just one state: California.

The eye found that bottom annual rate for a 10-year level term procedure worth 0,000 was 8. The bottom rate for a 20-year, 0,000 procedure was 3 a year. Those rates were available to both men and women aged 30 and 35. The bottom annual rate for a 30-year, 0,000 procedure was 8. That rate was available to 30-year-old men and women. At 35, the rate rose slightly for both genders, to 0 a year.

Term life insurance rates increase with age. They also go up depending on other factors, such as death rates at positive ages. Because women encounter breast and cervical cancer at relatively early ages, they in effect pay more than men do for 30-year policies at age 40. Women pay 5 a year for a 30-year, 0,000 policy, while men pay 5 a year. Men and women age 40 pay the same for 10-year policies (0 a year) and 20-year policies (3 a year).

The actuarial tables begin to turn at age 45. Women no longer pay more than men do for any policy. However, men pay more than women do for 20- and 30-year term policies: 0 and 0 a year for men, compared to 8 and 8 a year for women. Men and women both pay 3 a year for 10-year term procedure worth 0,000.

The pattern holds at age 50: Men and women pay the same for a 10-year procedure (3 a year), but men pay more than women do for a 20-year procedure (0 a year compared to 0 a year) and for a 30-year procedure (8 a year compared to 5 a year).

Men and women no longer pay the same for any term policies, beginning at age 55. The bottom rate for men for a 10-year, 0,000 procedure is 3 a year. For women, it is 5 a year. The bottom rate men can get for a 20-year procedure is 3 a year, while women can get the same procedure for 0 a year. Age 55 is the last year in the eye that men or women can qualify for a 30-year term policy. The bottom rate for men was ,550 a year; the bottom rate for women was ,080.

The purpose of the death benefit is to replace the lost revenue of a deceased family member. The estimate of the death benefit should equal the deceased person's annual revenue for a period of years, giving the family time to adjust to the changes. Experts differ on how long that period should be. Some say as diminutive as three years, others say as much as 10 years. If the breadwinner contributes ,000 a year, then a 0,000 death benefit would cover five years of lost income. To cover 10 years of lost income, the death benefit would need to be 0,000. To compensate for 10 years lost of an annual 0,000 income, the procedure would have to pay million.

As death benefits increase, so do rates, of course. The gap between men and women increase for the larger amounts, as well. This is because differences in mortality rates that are statistically insignificant at 0,000 begin to have an impact at the 0,000 level. Rates are not the same for 30-year-old men and women seeking a 30-year term procedure worth 0,000. The bottom rate for men is 5 a year. Women can get the same procedure for 18% less, or 5 a year. The variation between the genders increases--not just in dollar amount, but in percentage--at the million level. 30-year-old men must pay 0 a year for a million, 30-year term policy. Women the same age pay 21% less, or 5 a year, for the same policy.

Although the eye was based on individuals in ideal health, the increases in life expectancy and ongoing competition among insurers mean good deals are available for practically everyone.

The Actual Cost of Term Life assurance