What is Cheap Life Insurance
The cost of new life insurance has many factors that affect the premium, and age is a primary contributor because insurance carriers base rates on the likelihood of your passing date. In 2019, a 55-year-old male could expect the live about 25 more years and a female about 29 more years. Other factors in determining rates are,
- health – past and present
- tobacco use
- where you live
- height and weight
At 56 years, same as me, the first question to ask is,
“Do I need permanent (whole life) or term (temporary)?” This question could be re-phrased as “What need or problem are I trying to solve?”
If the primary answer is my beneficiaries need income replacement protection for ten years until I retire, then term life insurance is the answer. If I take home $50,000 after taxes (life insurance proceeds are tax-free) and income replacement is the only purpose of the policy, then I need a ten-year $500,000 policy. I might consider decreasing this amount since I do not need $500,000 all ten years.
For males, in Virginia, standard health class, non-tobacco, the best rate is about $142 per month, and there are other options within $5 per month.
Likewise, same parameters for a female, the best rate is about $134 per month and that rate is offered by a few carriers.
The policy will expire in 10 years, so there is no benefit if I do not die in that time frame. The use was temporary protection. Because the policy has an expiration, the rate is based on the likelihood of death in that time window.
If the answer to why I need life insurance is more that you want to leave a legacy perhaps to replace retirement income, clear debts, pay for funeral expenses, leave a gift, etc., and I want to ensure that I collect whenever I pass no matter what age I pass, I will look for a permanent whole-life policy. At age 56, many whole life policies may not be available as an option. Because these policies are designed so that the payout is guaranteed, they are more expensive, and therefore, I will look at less coverage. Let us say the coverage amount is $50,000.
For males, in Virginia, standard health class, non-tobacco, the best rate is about $163 per month, and there are other options within $25 per month.
Likewise, the same parameters for a female, the best rate is about $143 per month, and there are other options within $15 per month.
If I was purchasing today, I would buy a term policy to cover the next 10 years, and then supplement with a smaller whole life insurance policy. This solution covers my immediate, specific needs. If necessary, I might increase or decrease the coverage based on my budget.
So when the question is “What is Cheap?”, it is more a question of what insurance carrier offers the best rate for your circumstances of age, health, location, height/weight, occupation or hobbies, past history, and prescription drugs, in the context of your need.
Although shopping for a policy should begin with a need calculation, it is good to have ballpark figures, and you can use one of our online quoters. I like to use a TV purchase analogy. If my 65″ TV breaks, I want a new 65″ TV (let’s say it is a Need instead of Desire). If I know that 65″ TVs are all out of price range, then I will shop 50″ TVs or give up something else (HBO) to get the 65″. I do not fulfill my need, but I have partially fulfilled the requirement. Likewise, if the price of 70″ TVs is less than I expected, I will consider getting something better.
An independent licensed broker can help with a needs calculation and guide you with shopping for the best policy to meet your requirements, desires, and budget.