You know the basics of shopping and are ready to buy term life insurance. You have determined your needs and compared term life insurance quotes and companies, but your quotes are still higher than preferred. Finding quotes is the easy part, but ensuring you have the most affordable term life insurance rate may require more effort.
Exclusions
Exclusions can lower your term life insurance rates by adding stipulations to your policy. Meaning, your policy would provide coverage in the event of certain circumstances and not others. For example, if you enjoy the occasional rock-climbing trip, which can be a risky activity, and you chose to exclude it from your coverage, your life insurance policy would only pay out if the death were not caused by rock climbing. A risky activity, such as rock-climbing, can significantly increase your rate; excluding it will provide you with more affordable term life insurance rates.
Policy Length
When consumers purchase life insurance, they are actually purchasing a timeframe of coverage. Consumers purchase this timeframe based on where they are in life at that particular time. A young and healthy person would have a great rate and it makes sense for that person to lock in that rate for the longest amount of time possible because over time this person will age and possibly fall victim to health issues, both of which will increase rates. However, lengthy coverage puts more risk and responsibility on the insurer, so long-term policies will generally have higher premiums in order to counterbalance the risk.
It is more affordable to purchase a short-term policy for the same amount of coverage, than a long term option. Consumers can purchase a 5 or 10-year policy and when it expires they can simply purchase a new policy; however, age and new health issues will push the risk back to the consumer, but that is the price for affordable life insurance. Either the insurer or consumer will have to make up for that risk.
Rate Classes
Consumers are put into defined rate classes when they apply for life insurance coverage. These rate classes determine what your premium rate will be. Rate classes may have different eligibility criteria from one insurer to another; however, they are generally titled best, preferred, plus, and standard. It is important to note that some companies will consider factors such as family history to have more importance than others. The process of reviewing an applicant's information and assigning him/her to a rate class is known as underwriting.
While you cannot foresee the underwriting process of an insurer, there are ways of making sure you are in the best class possible. During the application process, you may feel that you are in the “best” class, and therefore be expecting best rates; however, that company may weigh factors differently and determine that you are in the “preferred” class, which would change your rates. This is why it is wise to not only compare quotes on your own, but to also work with an experienced insurance agent. Agents are familiar with the underwriting process and they will know which companies will offer you the best rate classes, based on your personal information. You can find an agent by finding an agency that specializes in placing difficult cases and that has a strong business history. Read More
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