There are many factors, like the kind of policy and the coverage it provides, influencing the average cost of life insurance. Fundamentally, there are two kinds of life insurance policies: term life and whole life. The cost of these two policies is different. The former offers benefits of savings but the latter doesn’t. Yet, the average cost of life insurance policies, including these two, is decided by the kind of coverage that one may ask for.
As already mentioned, the cost of these two policies is different for the different benefits they offer. Term life insurance policy pays the beneficiary on unexpected death of the policy holder. However, the policy holder can take loan against the policy as per the cash value of the policy. A whole life insurance, on the other hand, provides the benefits of investing in money market funds or bonds.
On opting for a whole life insurance policy you need to pay additional and buried costs because apart from the cost of insurance, you have to pay for the investment part that the policy makes on your behalf. The premium to be paid for this kind of policy includes commission payable to the agent apart from the fees, thus adding to its final cost. In case of term life insurance policy, you just pay the premium and no additional fees.
The average cost of life insurance policies of either kind is influenced by many factors, which include the age of the person buying insurance and the kind of coverage they wish to have. The other factors affecting the cost are smoking habits of the insured and outcome of medical tests conducted to assess their overall state of health. Non-smokers, on being in a better state of health, would pay a lower premium, compared to smokers having health issues. A benefit common to both the kinds of policies is that the amount to be paid every month remains unchanged for the duration of the policy.
Whole Life Insurance Price
As on August 2009, the typical coverage for a whole life insurance policy was $250,000, with the annual payable premium of $1200 that could go beyond $2,000, as per the specifics of individuals. You should know that a part of the premium goes to provide the coverage and another part increases the cash worth of your policy. The premium that you pay also includes commission and administrative expenses.
The price of term life insurance is calculated the same way as that of whole-life insurance policy. The only difference is that it doesn’t include any expenses apart from the commission of agents and the premium. An individual may buy a policy valid for 10-20 years, with coverage amount of $250,000 at an annual expense of $300-500 only. Generally, a term life insurance policy comes with an option of its renewal for additional years without paying any extra charge provided the policy is with a renewable guarantee.
When calculating the average cost of life insurance policies, keep in mind your specific requirements, age and state of health.