Not much is certain about what the future will hold in 30 years — and the same goes for the cost of the everyday items you use. After all, 30 years ago, a gallon of gas rang in at less than a dollar. But while it may be unrealistic to forecast your budget 30 years from now, one of the things that may stay the same is your monthly life insurance premium.
Does a term life insurance premium increase? Well, depending on the type of life insurance policy you purchase, it’s possible to pay the exact same amount per month for the 10-, 15-, 20- or 30-year term length that you choose. This type of policy has what’s called “guaranteed level premiums” and knowing what they are, how to find them, and when they work to your advantage can help you choose the right life insurance for your needs. And perhaps more importantly, help keep your insurance coverage affordable.
What is a guaranteed level premium?
A guaranteed level premium means that, as long as you continue to pay your premium each month, your rate is locked in for as long as the term length you choose. For many term life insurance policies, that’s typically 10, 15, 20 or 30 years. When the term ends, your coverage ends, or you can choose to renew coverage at a higher rate. Many people prefer guaranteed level premiums because, let’s face it, most of us don’t like for our bills to increase over time.
For young and healthy people, a term life insurance policy with a guaranteed level premium can lock in affordable life insurance rates for the duration of your coverage. For example, a 35-year-old man in excellent health can buy a 30-year, $500,000 term life insurance policy starting at about $36 per month. Over the next 30 years, assuming he pays the premiums on time, he’ll have that peace of mind for $36 per month until the end of his coverage term. A term policy with a guaranteed level premium can offer high-quality coverage at an affordable price.
When shopping for a policy, you’ll want to identify whether or not the policy premium would increase as you age. If your preference is for the premium to remain the same, which is the sentiment for many people, you’ll want to check that you are purchasing a level term life insurance policy.
How is a guaranteed level premium determined?
Your premium rate is determined by factors including your age, health, and lifestyle behaviors, like smoking. In the life insurance application, you’ll be asked questions about not only your health history, but also your family’s.
At Haven Life, to determine your rate, you’ll fill out an online application, which may be followed by a medical exam. The purpose of the life insurance medical exam is to help the insurer determine the appropriate price for your policy.
With Haven Life’s InstantTerm process, for applicants up to age 59 seeking a $1 million death benefit or less, some will qualify to finalize coverage without a medical exam – based on the information provided during the application process. Customers are notified once an app is submitted if they qualify to skip the exam. Keep in mind that it’s always very important to be honest in the application process. Issuing the policy or paying its benefits depends on the applicant’s insurability, based on their answers to the health questions in the application, and their truthfulness. Some applicants will be required to take a medical exam.
If you’re young and healthy, a medically underwritten term policy can lock in an affordable rate for your coverage duration, whether that be 10, 15, 20 or 30 years, no matter what may happen during that time. The death benefit of a guaranteed level premium life insurance also does not change.
Quotes for guaranteed level premium term life insurance
Here are some sample guaranteed level premium term life insurance quotes for the Haven Term life insurance policy, issued by MassMutual, at different ages, genders, coverage amounts and terms, as of June 17, 2019:
- A 30-year, $250,000 Haven Term policy, issued by MassMutual, for a 25-year-old man in excellent health is $24.49 per month
- A 20-year, $500,000 Haven Term policy, issued by MassMutual, for a 30-year-old woman in excellent health is $19.46 per month
- A 15-year, $750,000 Haven Term policy, issued by MassMutual, for a 35-year-old man in excellent health is $22.32 per month
- A 10-year, $1,000,000 Haven Term policy, issued by MassMutual, for a 40-year-old woman in excellent health is $27.76 per month
Regardless of what coverage you choose, peace of mind is perhaps the most important intangible benefit associated with purchasing a life insurance policy. It gives you the reassurance that you’re leaving behind financial protection for your loved ones. The beneficiary (or beneficiaries) can use the policy’s death benefit to help cover funeral expenses, meet day-to-day living expenses or plan for the future.
Guaranteed level premiums versus annually renewable term life insurance
As you’re researching term life insurance policy options, you may come across the term “annually renewable premium.” What does “annually renewable premium” mean? This type of premium is renewable each year, and the premiums will go up over time as the policyholder ages. In other words, the premium payment isn’t locked in, and over time may cost more than a level premium term life insurance policy.
So why would someone choose a policy with an annually renewable premium? There are some cases where this can be a good option.
In the first year or two of the policy, the premium may be less than a guaranteed level premium policy. But for an annually renewable premium term policy, the premium will increase each year. Over time it’s possible to pay more in premiums than what would have been paid for a level premium term policy.
An annually renewable policy may be an option for someone who needs coverage only temporarily. For example, if you have a debt you’ll pay off in a year or two – since, remember, its pricing can be less than a guaranteed level premium policy for the first couple years.
For most term life insurance buyers, however, coverage is needed for more extended periods of time — until the kids are adults or the mortgage is paid off. For those seeking coverage for extended term lengths, an annually renewable policy may not be cost-effective. That’s one reason why guaranteed level premium policies are appealing.
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How to get the most affordable life insurance coverage for you
Buying a life insurance policy is a selfless financial move that helps financially protect your loved ones should you no longer be around. It’s important to select a policy that provides your loved ones with the right amount of coverage for your family’s needs and at a rate that will not be harmful to your family budget. Fortunately, with term life insurance, that’s usually very easy to do. Here’s how to choose a policy that’s a good fit for you:
How much coverage do you need?
The “right amount of coverage” varies from person to person and depends on your age, your income, your debts (including a mortgage or car payment) and your family’s plans for the future. When choosing your coverage amount, take into consideration things like your mortgage obligation, funding for your children’s college tuition and day to day living expenses – to help your family shoulder these costs if your salary were no longer there. An online life insurance calculator can help you determine what the optimal coverage amount might be for your family.
How long should your term length be?
Term insurance policies with guaranteed premiums are usually available in 10-, 15-, 20- or 30-year term lengths. For that set amount of time, as long as you pay your premium, your term life insurance rate is locked in, and your beneficiaries are protected.
So should you choose a 30-year term length? Not necessarily. In general, a shorter term policy may have a lower rate than a longer policy, so it’s smart to choose a term based on the projected length of your financial responsibilities. For example, if you have a 30-year fixed mortgage, buying a 30-year term length policy may make the most sense, to help make mortgage payments if you were to die. For others — those who may be close to retirement, have teenage kids, or have significant financial assets — a 10-year-term length may make the most sense. Again, an online insurance calculator can help you determine the optimal term length for your situation and help you estimate your life insurance policy rate. Choosing the right term length — not too short and not too long — can also make your policy more affordable.
Consider the rating of the issuer of the policy
Not all life insurance products are alike, and it’s important to understand the reputation of the life insurance company that issues your policy. After all, life insurance is a long-term relationship, and it’s important to feel confident in the financial strength of the company you choose.
That’s where life insurance ratings come into the picture. Life insurance companies receive ratings from independent agencies based on their assessment of the insurer’s financial strength and claims-paying ability. Four of the rating agencies most frequently referred to are A.M. Best, Fitch, Moody’s and Standard & Poor’s.
A higher rating for an insurance company can serve as an indicator of its claims-paying ability, which is ultimately an indication of if it’ll be around to pay out a policy if it’s needed. Based on their analyses of customer complaints, available cash flow, and acceptable risk, the agencies provide an independent, objective opinion. The rating scales work like grades in school, so an “A” is better than a “C.” For example, Massachusetts Mutual Life Insurance Company (MassMutual), which issues the Haven Term policy, is A++ rated by A.M. Best.
You don’t know what the future holds. In 30 years, your gallon of milk may be $10. Your Netflix may be $100 a month. And who wants to guess the cost of a gallon of gas (to fuel your spaceship, of course!) But if you choose a level premium insurance policy, knowing that you’ll pay the exact same cost per month for your premium is something you can count on.
It’s not just easier life insurance, it’s an easier life.
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Anna Davies is an editor at Haven Life. She has written for The New York Times, New York Magazine, Refinery29, Glamour, Elle, and others, and has published 13 young adult novels. She lives in Jersey City, NJ, with her family and loves traveling, running, and trying to find the best cold brew coffee in town.
Financial strength ratings are as of June 12, 2019: A.M. Best Company: A++ (Superior; top category of 15); Fitch Ratings: AA+ (Very Strong; second category of 21); Moody’s Investors Service: Aa3 (High Quality; fourth category of 21); Standard & Poor’s: AA+ (Very Strong, second category of 21). Ratings are for MassMutual (Springfield, MA 01111) and its subsidiaries, C.M. Life Insurance Co. and MML Bay State Life Insurance Co. (Enfield, CT 06082). Ratings are subject to change.
Ratings do not apply to Haven Life Insurance Agency. Haven Life is an online life Insurance agency that offers the Haven Term policy issued by MassMutual.