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An Explanation Of Term Life Insurance Rates

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Why are there difference in term insurance rates? Why is the premium of one term policy, within the same company, different from another? Why does a 10 year term policy cost less than a 20 year term policy?

The answer is simply a matter of time. The older you are the more life insurance costs. Let us use the yearly renewable term policy to illustrate how life insurance costs more as you get older.

The yearly renewable term policy is a one year term policy which you can renew each year without evidence of insurability. Each time you renew the policy you pay a higher premium. As you get older it costs more.

Let us look at it this way, a 20 year old man is more than likely in better health than a 40 year old man. He is likely to live many more years from that point than the older man. He therefore pays less for life insurance than the 40 year old man.

Level term premiums are really an average of the premiums for the term period. 5 year term level yearly premiums are actually the total of the premium costs over the 5 year period divided by 5. 20 year term premiums are calculated in the same manner.

There are a few adjustments made by the actuaries but this is basically how it works. The longer the time you plan on keeping the policy the higher the annual term insurance premium rates.

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