Life Insurance Premiums: What You Should Know
A life insurance premium is the amount paid to an insurance company in exchange for which the firm will give a benefit payment, upon the death of the insured individual, to the beneficiary stated in the policy. The amount of the premium relies upon some factors that have to do with the policy including the probability of the death of the insured during the policy term, the kind of life insurance, the commission of the agent and administrative costs. The rates of the premium are also impacted by the financial condition of the insured that will include considerations like the ability of the company to pay the anticipated claims.
A type of life insurance called term life insurance is made to be effective just for a set period of time. The shorter the term the lower the premium’s cost as the possibility of the death of the insured in the short term is less than over a longer term. The premium for this type of policy often stays at similar level for the policy’s life, although there are self-renewing term policies that increase rates for the premium periodically. When the policy expires, the insured’s death will not be given any payment. This is the reason term life insurance policies will have specific dates and time of expiration.
Meanwhile, permanent life insurance does not expire. It lasts for the insured’s entire life or his or her 100th birthday. If the insured reaches 100 years old, the policy has already gone matured and the insured will be paid with full benefits. If he or she dies before he reaches 100, the beneficiary will receive the full benefits. The premium for this type of insurance is typically higher as a part of this is kept and invested on the policy’s behalf, granting the policy with cash value which can be obtained by the owner of the policy.
There are other types of life insurance policies that integrate features both of whole and term policies, but these two are the main types. Whichever type suits your capacity to pay and the needs of your family, you can evaluate each type before you decide to buy a policy.