Compare Term Life Insurance Policies

Q: What factors determine term life insurance rates?

Although term life insurance tends to be quite affordable, several factors can impact the cost such as Age, Health, Policy Term, Coverage Amount, Gender, Tobacco Usage, Job, Hobbies and Driving Records.

One of the most popular types of life insurance for the budget-conscious policyholders is term life insurance. This policy offers a significant death benefit for a fixed policy term. However, there are several factors to consider when shopping for a policy. Let’s dive deeper into the different types of term life insurance to help you determine which could be best for you.

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Table of Contents

How does term life insurance work? 

Term life insurance is a policy type offering coverage for a fixed term length that often ranges from 10 to 30 years. If you pass away during this term, your loved ones receive a significant death benefit to use as they need. If coverage expires before you pass away, you can renew coverage at higher rates, get a new policy, or forego coverage. Premiums for this type of policy can be the most cost-effective option.

How much term life insurance do I need? 

Several factors can impact your potential coverage needs:

Loved ones' needs: Evaluate your loved ones’ current and future potential expenses. For example, if you have children, you may need more coverage to ensure they’re covered.

Income replacement: If your loved ones rely more on your income or you have more expenses, you may need more coverage.

Debts: Outstanding debts can place significant financial strain on loved ones and reduce the wealth you pass on. If you have several debts, consider getting more coverage.

Financial goals: Do you have a partner who needs help saving for retirement? Do you have kids who plan on going to college? Review your financial goals to gauge how much coverage you may need to meet them.

Existing assets: If your loved ones have significant assets already, you may not need as much coverage.

Types of term life insurance policies 

Several forms of term life insurance are available, including:¹

Level term life insurance 

Level term life insurance premiums don’t change throughout the policy term. This helps you find premiums that may fit into your budget and plan your finances around them. As a result, it’s easier to keep up with your coverage costs.

Yearly renewable term life insurance 

Yearly renewable term life insurance lasts one year but allows you to renew coverage at the end of each term. Each renewal causes an increase in premiums. Since these policies are less risky to the insurer, they may be more cost–effective than level term life insurance at first.

Decreasing term life insurance

Decreasing term life insurance policies feature a death benefit that decreases over time, but premiums stay the same. These policies may work if your loved ones’ coverage needs decrease over time. They may also work well if you need to help cover debts since those shrink with each payment.

Decreasing term life insurance policies are less risky for insurers since the death benefit decreases over time while premiums don’t change. These policies tend to be more cost-effective than level term policies that start with the same amount of coverage.

Return of premium life insurance 

Return of premium life insurance refunds your premiums paid if coverage expires and you don’t pass away, but premiums tend to cost more since the insurer bears the risk of repaying you. Therefore, these policies may help policyholders feel confident that they’ll outlive coverage but want added peace of mind.

Convertible term life insurance

Convertible term life insurance lets you switch your term policy to a permanent life insurance policy, usually at any time throughout the term, with no medical exam. This can help you hedge against the risk of outliving your policy and avoid taking another medical exam for new coverage. However, the convertible term policy premiums may be higher than a level term policy. Plus, keep in mind that permanent life insurance costs more to account for its lifelong coverage and cash value.

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What factors determine term life insurance rates? 

Although term life insurance tends to offer rates that fit many budgets, several factors can impact the cost:

Age: Premiums increase with age. The younger you get coverage, the lower your premiums could be.
Health: Personal and family health history of medical conditions may lead to higher premiums. However, evidence of vigilant management of health conditions can cause insurers to be more lenient.
Policy term: Longer terms tend to cost more, given the same coverage amount.
Coverage amount: The larger your death benefit, the more you’ll pay.
Gender: Men have a lower average life expectancy than women, meaning they pay more premiums.²
Tobacco usage: Smokers pay more than nonsmokers for coverage. Some other forms of tobacco usage may qualify an applicant as a smoker.
Job: Certain jobs are inherently riskier, such as law enforcement, firefighting, construction, and aviation. Workers in these and similar industries may pay more premiums.
Hobbies: Like jobs, certain hobbies and activities are riskier from the insurer’s perspective. Engaging in hobbies like skydiving or car racing can result in higher premiums.
Driving records: Some insurers check your driving record. A clean driving history can result in lower premiums.

How to compare term life insurance

When comparing term life insurance options, look closely at the following factors:

Coverage amount 

The coverage amount is crucial. This represents the death benefit your loved ones receive if you pass away. Make sure to look at your current income and that of your loved ones, along with expenses and debt payments. This will help you see which policies offer enough coverage to best meet your needs and avoid overpaying.

Term length 

Longer term lengths cost more but may be worth it if you need coverage for a longer period. For instance, if you’re starting a family and want life insurance until your children become adults, you may consider a 20-year policy.

Rates 

Life insurance rates, or premiums, can vary depending on your personal factors and medical history. However, insurers may charge different premiums for the same policy on the same person. Getting multiple quotes helps you find the coverage you desire.

Riders

You can add riders to customize your coverage, either complimentary or for an additional cost. For example, some optional riders may let you access part of your death benefit while alive if you’re diagnosed with a qualifying terminal illness and need assistance to help pay for medical costs and related expenses.

Another example are optional riders that allow you purchase additional coverage at specific times during the policy term without a new application or medical exam. These types of riders may help if you take on more debt or your expenses increase.

Get a quote for term life insurance 

Term life insurance doesn’t last for life. It can be an excellent option to consider if you need a straightforward policy with maximum coverage for your premiums. From level term to return of premium insurance, many types of term life insurance exist to suit a wide range of needs. 

Aflac’s term life insurance comes with various term lengths, offering coverage options with premiums that may fit your budget. Speak with an agent today to explore policies and learn about our other life insurance options.

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