Term Life Insurance Death Probability

The Probability of a Death Claim Being Paid Out on a Term Life Insurance Policy

What is the probability of death during a term life insurance policy?

The odds you will die during the term (duration) of time you are covered by your term life policy depends on several factors, including your age, gender, health, lifestyle, tobacco use, hobbies, occupation, height-to-weight ratio, driving record and length of term for your life insurance policy.

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What is the probability of death during the term of my life insurance policy? 

It's the chance of you passing dying during your life insurance term. The "term" is the length of time your term policy provides life insurance protection on your life.

On average, a life insurance company may expect to pay out a death claim on a term life policy for about 1 out of every 100 people insured.

However, the odds may be even less, since many people either choose to stop paying the premiums on their term life policy before their coverage ends, cancel their coverage, or outlive the duration of their policy term.

The term or duration of your term life coverage does make a difference in the probability of your death, since the longer the term, the greater the chance you will pass away while covered by your term life insurance policy.

That’s why rates are lower for a 10 or 15 year term life policy compared to rates for 20 or 30 years of term insurance.

 

How does term life insurance work?

Term insurance is temporary coverage for a set period of time. If you pass away during the term of your policy, your beneficiary receives a death benefit pay out from your life insurance free from federal income taxes.

 

How long does term life insurance last?

Most life insurance carriers offer term insurance for a term of 10, 15, 20 or 30 years. However, it may depend on your health and age, since some seniors may only be able to purchase a maximum term of 20 years, but that depends on the life insurance company.

 

Why does term life insurance cost so much less than permanent life insurance?

Term life is pure life insurance protection with no cash value, just insurance.

In addition, term insurance pays out much fewer claims on their life insurance policies compared to permanent life insurance, for the following reasons:

  • Term is temporary coverage
  • Many people outlive the duration of their term policies
  • Some people cancel their term life coverage.
  • Permanent life is guaranteed to last your entire lifetime
  • Permanent life insurance builds up cash value inside the policy over time.

 

How many term life insurance policies pay out a death benefit?

A Penn State study completed in 1993  said that less than 2% of all term life policies paid a death claim, and that less than 10% of all term policies stayed in force during the entire initial term period.

The study determined that only 1% of all term insurance resulted in death claims. That means on average only 1% of all term policies will pay death benefits.

Why? Because only 1% of all term policy owners keep their coverage beyond 15 to 20 years. (Penn State University, 1993 Study)


Here are additional results of the Penn State Study of Term Life Insurance:

  • More than 90% of all policies are terminated or converted to permanent life insurance before the end of the term.
  • 45% of all term policies are terminated or converted within the first year of being insured.
  • 72% of all term policies are terminated or converted within the first 3 years of being insured.
  • The average duration of a term policy before termination or conversion is 2 years.
  • Less than 1 policy in 10 survives the period for which it was written. 
  • After 15-20 years exposure, less than 1% of all term life policies are still in force.

 

What factors impact my rate for term life coverage?

There are several key factors that affect the price you pay for life insurance including:

 

In addition, several of your personal risk factors that affect how long you are expected to live will impact the price you pay for life insurance, including:

  • Gender
  • Lifestyle
  • Tobacco Use
  • Occupation
  • Hobbies
  • Driving Record
  • Height-to-Weight Ratio

 

Do term life insurance policies pay out?

Actually, term life plans rarely payout death claims because 1 out of every 14 term life customers stop paying their premiums each year, according the life insurance industry group LIMRA.

 

How much does term life insurance cost?

The cost of a term life policy will vary by insurance company. You can request and compare instant term life insurance rate quotes to find the most affordable plan from a financially secure insurance company.

 

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