Term Life Price Points and You |
Published : 2009-08-15 09:53:51 Popularity : 
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It's important to understand that there are price points or certain amounts of term life at which the average dollar per coverage drops. It's the closest equivalent to a bulk discount that life insurance carriers offer. Let s run some quote and take a look at how this works.
First, each carrier has different pricing models but there are some key price points that usually hold true. As long as you can afford the monthly premium, a key concern when picking the right life insurance plan is the cost per dollar of coverage. This is very different from the premium amount you pay. Let s take a quick look at an actual quote we ran to show the cost per dollar.
We ran an actual quote based on this set of criteria: Age 40; 20 year term to show in real terms what these price points look like and how they can save you money
So let s break down what we find. First, let s look at the first two situations...$100K and $200K. If this person buys $100,000 of term life insurance for a 20 years term, the cost would be 13 cents for each $1000 dollars of coverage each month. This is still very inexpensive for life insurance coverage. Now, look at the second column. If this person buys an extra $100K for a total of $200K (double the initial amount), then the cost per $1000 of coverage is 9 cents. That a huge 44 savings when comparing the key metric of cost per dollar of life insurance coverage. You would much rather pay 9 cents than 13 cents. What this means is that if you can afford either monthly premium ($18 or $13), then you are getting a much better value going with the $200K.
On the next step up, there is a 28 discount going from $200K to $300K in coverage. That a difference of 9 cents per $1000 of coverage versus 7 cents. The monthly term life premium difference would be $18 versus $21. 28 is still a pretty big discount. That adds up to significant savings over a 10 or 20 year span of time.
As you keep working down, the discount percentage drops with each extra $100K of coverage but there s still a discount. If you can afford the 100K 500K level, there s a strong reason to look at the $500K or $600K range assuming this meets your term life amount needs. It's still amazing that a 40 year old can look at around $40/monthly for $750K of coverage. Term really has become pretty inexpensive over the years. The discount starts to narrow as you get into higher amounts but keep in mind that a) it still exists and b) it is applied to a much higher amount of term life coverage. For example, with $1M of coverage costing $59 monthly, a doubling of this cost would be $118. Instead, $2M of coverage is $113.
Ultimately, your life insurance needs dictate how much to buy but it s smart to understand how these price point discounts work among different levels of coverage. |
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Source : http://www.articleonlinedirectory.com/
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