Choosing an affordable life insurance policy that meets your financial needs can be a difficult task. Not only do you have a wide range of options to choose from, but you also have to consider a number of factors before zeroing in on a policy.
To make your job easier, we at noexam.com have prepared this guide to help you choose a low-cost insurance policy that is best suited for your budget and needs.
The Average Cost of Life Insurance in the United States
Cost is the most important factor that people take into account while buying an insurance policy, or any product or service for that matter.
The problem, however, is that the average person has several misconceptions about life insurance, one of which is regarding the cost of a typical life insurance policy.
According to a study by LIMRA, many people in the country are not insured because they believe it is too expensive. The average person significantly overestimates the cost of life insurance, as a result of which they are reluctant to get themselves and their families insured.
The truth, however, is that the average cost of life insurance in the US is lower than many people think.
If you are a healthy 30-year-old man, you can get a 30-year term policy with a face value of $250,000 for $240 a year. If you are a healthy 30-year-old woman, you can get the same policy for just $206 a year.
It should be noted that this is the average cost of a life insurance policy, calculated based on the premiums charged by insurance providers for people in the low-risk category. The actual cost of your policy could be higher, if you are from a different age group or if you are suffering from any medical condition.
Now, let us take a look at the key factors that determine the cost of your life insurance policy.
Factors that Determine the Cost of Life Insurance
This is the number one factor that impacts the cost of a life insurance policy. As mentioned in the example above, if you are 30, you can get a $250,000 policy for $240 a year. If you are 40, the same policy will cost you $384 a year. If you are 50, it will cost you $913 a year.
The risk of mortality increases with age. This is why a person in his 40’s has to pay more than a person in his 20’s for the same policy with the same kind of benefits.
Research shows that once you reach the age of 40, your life insurance costs could increase by 10% to 15% every year. This is why experts say that you should get insured when you are young.
Men generally pay more for insurance compared to women. Statistically, the average woman has a higher life expectancy and a lower risk of mortality compared to the average man. Insurance companies take this factor into account while determining the cost of a policy. So, if you are a woman, your insurance policy is likely to cost you 15% to 40% less than that of a man.
The cost of your policy tends to increase with the term length. So, a 30-year policy will obviously cost you more than a 10-year policy, other factors notwithstanding. Still, it is always a poignant idea for you to select a policy with a longer term length, even if it means paying a little more towards premiums every month.
Thanks to the advancements in medical science, the average life expectancy in the US has increased considerably over the years. So, even if you are in your 40’s or 50’s, it makes sense for you to opt for a policy with a longer term length, so that you stay insured in your post-retirement years.
This is a basic rule of life insurance. The higher the face value of your policy, the more you have to pay towards premiums. For example, if you are a 30-year-old man, a $250,000 policy is likely to cost you around $240 a year.
A $500,000 policy, on the other hand, is likely to cost you $403 a year. If you are a 30-year-old woman, you are likely to pay $206 for a $250,000 policy and $335 for a $500,000 policy.
Apart from your age, this is the most important factor that insurance companies take into account while issuing a policy for you. Underwriters tend to review your past medical history as well as your current health status to determine your insurability.
Insurance companies generally determine your mortality risk based on your weight, blood pressure, blood sugar levels, and cholesterol levels.
If you are overweight and/or if you have any diseases or medical conditions like diabetes, hypertension, or heart disease, you are likely to pay more for insurance compared to people without any pre-existing conditions.
Similarly, if you have a family history of diabetes, heart disease, and other such health problems, you are likely to be charged more for insurance compared to the average person.
Smokers have a higher risk of mortality and lower life expectancy compared to non-smokers. So, if you are a smoker, you can expect to pay significantly more than a non-smoker for the same kind of policy. That is only logical right?
For example, if you are a non-smoker, you are likely to pay around $11 a month for a 10-year term policy with a face value of $250,000. If you are a smoker, you are likely to pay around $29 for the same policy.
If you, on the other hand, have a history of smoking, but have quit the habit now, you are likely to pay less than a smoker for the same kind of policy.
If you are in a profession that is deemed ‘high risk’ by insurance companies, you are likely to pay more for your insurance.
Common examples of high risk occupations include trucking, farming, roofing, power line installation and maintenance, mineral and natural resource extraction, logging, commercial fishing, and construction, all of which have a higher rate of accidents and fatalities compared to most other occupations.
Your hobbies can also have a major impact on your insurance costs. If you have a hobby that could be considered dangerous, you are likely to pay more for your insurance, even if you happen to be in excellent health. Hobbies that are considered dangerous by insurance companies include skydiving, base jumping, snorkeling, skiing, snowboarding, mountain biking, and trekking.
Based on the aforementioned factors, insurance companies classify you as ‘low risk’, ‘high risk’, or somewhere in between, depending on the criteria they have, and determine your insurance rates accordingly.
Top Five Insurance Most Affordable Life Insurance Companies
Let us now take a look at the top five life insurance companies that offer life insurance at very competitive prices.
Alabama based Protective Life Insurance Company has been in business for over 100 years. It has an A+ rating from A.M. Best, AA- rating from Standard & Poor’s, A+ rating from Fitch, and an A1 ranking from Moody’s.
Mutual of Omaha
Founded in 1909, Mutual of Omaha offers a wide range of insurance products for individuals as well as businesses. It has an A+ rating from A.M. Best, A+ rating from Standard & Poor’s, and an A1 ranking from Moody’s.
North American Company for Life and Health Insurance was founded in 1886. It is one of the most recognizable names in the industry today and a leading provider of insurance products and annuities in the country. It has an A+ rating from A.M. Best, A+ rating from Standard & Poor’s, and an A+ rating from Fitch.
Principal Life Insurance Company was established in 1879 and is based in Iowa. It has an A+ rating from A.M. Best, A+ rating from Standard & Poor’s, AA- rating from Fitch, and an A1 rating from Moody’s.
Maryland based Banner Life Insurance Company was founded in 1949 and has managed to become a leading insurance provider in the country in a relatively short term. It has an A+ rating from A.M. Best, AA- rating from Fitch, and an AA- rating from Standard & Poor’s.
Now, let us take a look at the average cost of life insurance policies offered by these companies. The rates given below are an approximation of what a 40 year old woman in good health can expect to pay for a life insurance policy from these companies.
|Mutual of Omaha||$11.99||$17.24|
All five of the companies listed above are financially stable, have been in business for a long time, rated highly by agencies and customers alike, and are known for their affordably priced products. So, if you are looking for a low-cost insurance provider, any one of these companies might be a good choice for you.
You should, at the same time, remember that insurance policies are highly individual and the rates might differ from one person to another, depending on the factors mentioned above.
In the next section, we take a look at 10 tips that can help you find affordably priced insurance policies.
Tips to Get Affordable Life Insurance
- Make a list of five or ten top-rated insurance companies, contact all of them, and get multiple quotes. Compare the offers with each other to determine the best deal for you. Remember – the best policy is not necessarily the cheapest one. So, choose a policy that covers your needs and suits your budget at the same time.
- Buy life insurance when you are young, preferably in your 20’s. It is the best way to get the cheapest rates possible. Moreover, the longer you wait, the higher are your chances of developing a health problem, which could affect your insurability and cause your policy costs to go up.
- Press the button for annual premium payments. It is easier for you, as you can just pay once and forget about it for a whole year. Moreover, some insurance companies offer discounts on annual premium payments, so you might be able to save some money as well.
- Avoid unnecessary riders and additional benefits. Choose a rider only if it adds more value to your policy and if you are certain that the increase in cost is worth the extra protection and benefits it offers.
- Stop smoking. It is one of the easiest (withdrawal effects notwithstanding) ways to reduce your life insurance costs.
- Try and lose some weight by eating healthy and exercising regularly. If you are overweight, your insurance rates could increase, even if you do not have any health problems.
- Do not drink and drive and do not do drugs, as it can put you in the ‘high risk’ category, which can cause your insurance rates to go up.
- Do not do anything that could leave you with a prison record. It not only affects your social status and employment opportunities, but also makes it harder for you to get insured.
- Do not travel to countries with extremely high crime rates, disease outbreaks, or economic strife and sectarian violence. Traveling to such places is considered risky behavior by insurance providers, due to which you might have to pay more for your policy.
- Avoid extreme sports and high-risk hobbies. You can get the same adrenaline rush by taking jujitsu classes on the weekends or playing basketball a few miles away at a nice outdoor or indoor court. This way, your insurance costs will not go up.
Mistakes to Avoid While Buying Life Insurance
- Do not take advice from captive agents who represent a particular company. Since they have only one product to sell, they will try to convince you that it is the best, even if it does not meet your needs.
- Look for independent agents who can provide you with quotes from multiple companies. Or better yet, contact noexam.com to choose the right policy for you.
- Do not make the mistake of underestimating your insurance needs. Do not pick a number out of thin air without doing your homework. $250,000 might sound like a lot of money now, but will that be enough to cover your family’s needs if you pass away 20 years from now?
- You can calculate the amount of death benefit you need based on your age, health condition, your income level, the number of productive years you have left, the size of your family, and your debts.
- Do not get fixated on the cost factor alone. As mentioned above, the cheapest policy does not necessarily have to be the best option for you.
- There is no harm in paying a few dollars more per month, if it means getting additional protection for you and your family. So, look for affordable insurance by all means, but do not reduce your coverage or open the door for an unreliable insurance provider just because the costs are low.
- Do not depend on group insurance provided by your employer. First of all, it might not be sufficient to cover your financial needs. Second of all, it usually ends when you resign from your position or get terminated.
- Sure, your new employer might also offer group insurance, but what happens if it takes you a few months to find another job? It is not a prudent idea to remain uninsured, even if it is only for a few months. So, select a personal life insurance policy to make sure you are covered irrespective of your employment status.
- You are not too young or too old to get life insurance. If you are 20 and have a job, insure yourself by all means, as you can get the best rates possible. If you are 60 and retired, do not think that you are too old to get insured.
- The average life expectancy in the US is 79 years and if you are a healthy individual with no serious medical problems, you can expect to live even longer. So, you should get insured, so that your family can take care of your funeral expenses and pay off outstanding bills and small debts.
Choose Low-Cost Life Insurance
Insurance is absolutely necessary for you, irrespective of your age and health condition. Even if you are old and/or have pre-existing conditions, you can still get insured, as there are companies that offer no-exam, no-questions-asked policies that you can qualify for.
So, do not avoid life insurance for any reason. It is undoubtedly one of the best ways to cover the needs of your family even after you are gone.
What NoExam.com Offers You
Noexam.com offers you a wide range of information on low-cost life insurance, including background information on cost-competitive life insurance providers, the policies they offer, factors to consider while choosing an affordable policy, factors that determine the price tag of a policy, and much more.
If you are in need of life insurance, we can help you find a policy that suits your needs and your budget.
Finding the Most Affordable Life Insurance Companies by Jonathan Holloway