Affordable Life Insurance Protection for Your Family
Premiums on Term Life Insurance
If you’re in need of term life insurance you may be wondering how the premiums work.
Since term life is temporary protection for a set period of time, you pay premiums for the duration of your policy. However, does your premium ever increase?
This is an important question to ask before choosing to purchase a term policy.
YES, life insurance premiums can increase, unless they are guaranteed to stay "Level".
One of the biggest factors on how much life insurance costs, is the length of time for which you lock in your premiums.
For Example: If you buy a 15-year level term policy, the premium will be relatively low, but will only stay the same for 15 years. After that, the premium will increase quite a bit.
However, if you buy a permanent policy with guaranteed level premiums, the initial premium will be higher, but you will never experience a rate increase – you pay the same amount for the life of your policy
When you are approved for a life insurance policy, you will see right at the front of the printed policy contract how long your premium is guaranteed to stay level, and at what point the premiums will increase, if ever.
If you are nearing a point in your policy where your premiums will go up, you might want to take care of that now, as you may have options that will not be available after the premium increase goes into effect.
If you buy term insurance, premiums can change each year, or if level term, at the end of whatever term you select.
Some older term life policies were designed to be annually renewable (ART's) with each renewing year's premium increasing to reflect your newly attained age.
These older ART policies have in many cases been replaced by the more modern "Level Term" policies.
These newer level term policies are insurance contracts that lock in the premium you pay from the beginning for a certain period of time, usually 10, 15, 20 or 30 years.
There are several different types of term policies available, which offer different handling of premiums, whether your premium is locked-in to remain the same for the life of your policy, or it increases after a certain number of years.
Types of Term Insurance and Premiums
Here is a review of some of the more popular types of term policies available for you to better understand how they work, and how the premiums may or may not change.
Level Term Life Insurance – Premiums on level term policies remain level (the same) for the entire duration of your policy term. You may select coverage lasting for a term of 10, 15, 20, 25 or 30 years, usually – depending on your age and health.
Decreasing Term Life Insurance – Premiums on decreasing term policies remain level for the entire duration of the policy term; however, the amount of life insurance protection provided by the policy decreases each year you are insured.
Annual Renewable Term Life Insurance – Coverage is provided for a period of one year at a time. If you choose to renew your policy for another year, the premium will be higher for your renewal policy.
Term to Age 70 – Premiums remain level for the first 20 years of your coverage, then premiums increase each year thereafter.
Other Types of Term Insurance Plans
Return of Premium Term Life – Coverage provided is usually level term with premiums that remain the same each year for the term of your policy. However, the premiums are higher than for regular term life with no return of premiums.
No Medical Exam Term Life – Coverage provided is usually level term with premiums that remain the same each year for the duration of your policy term. However, premiums for no exam coverage are higher compared to term life that requires a medical examination.
Examples of Term Life Insurance Premiums That Increase
Renewal of an Existing Term Policy – If you choose to renew your term life plan, the renewal premium will be higher because the new rate is based on your age at the time you renew your coverage.
Annual Renewable Term Insurance – Each year you renew an annual renewable term policy your premiums increase because you are one year older at the time of your renewal.
Term to 70 – Usually, premiums remain level only for the first 20 years of a Term to 70 policy.
Do Life Insurance Premiums Increase with Age?
Life insurance premiums increase as you age.
However, once you ‘lock-in’ the rate on a term policy, it will not increase until the policy expires.
But if you wait to buy coverage, the premium you get will be higher than you would have qualified to purchase, at a younger age.
What is Level Term Insurance?
Level term insurance is a type of life insurance that provides consistent coverage over a specified amount of time.
The face value of a level term policy remains the same for the duration of the period selected.
Typically, level term life premiums are much lower than those of permanent insurance policies.
The length of the coverage term directly influences the premium charged, with higher premiums generally charged for term plans that have a longer policy duration.
Does a Term Life Policy Increase as You Age?
Depending on the type of life insurance policy you purchase, it’s possible to pay the exact same amount per month for the 10-, 15-, 20- or 30-year term length that you choose.
This type of policy has what’s called "Guaranteed Level Premiums" because the premium you pay stays the same for the entire duration of your coverage.
What is a Guaranteed Level Premium?
A guaranteed level premium means that, as long as you continue to pay your premium each month, your rate is Locked-In for as long as the term length you choose.
For many term policies, that’s typically 10, 15, 20 or 30 years.
When your policy term ends, your coverage ends, or you can choose to renew coverage at a higher rate, which means the premium you pay for your coverage will be higher than what you paid for your expired policy.
Many people prefer guaranteed level premiums because most of us don’t like for our bills to increase over time. With guaranteed level premiums, you guarantee your cost of life insurance won’t increase during the life of your policy.
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