If you consider taking out whole life insurance, your first question is how much whole life insurance costs. Of course, that is a million-dollar question, but I am afraid there is no easy answer. Since there are so many variables and so many different whole life insurance products, the only way to ascertain the cost is to look at a specific situation, consider all of the essential factors and then arrive at a cost analysis.
Let’s look at some factors that affect whole life insurance costs.
Factors that affect the amount of your whole life premium
The most crucial factor is the age of the insured. The older you are, the more expensive your premium will be. The reason for this is that an older person’s life expectancy is shorter than a very young person’s, and you will thus not be projected to pay as such in premiums in the long term.
Strongly linked to this is the status of your health. The less healthy you are, the more your premiums will be increased to cover the eventuality of early death due to health risks and conditions.
Most people fit into the standard health category. Still, the classes are pretty specific and range from Preferred Plus for extraordinarily healthy and active individuals with no lousy health habits to Standard Tobacco for people who admit to ever having smoked a cigarette. Smoking is heavily penalized due to the increased health risks that are posed.
The design of your policy also has a significant impact on the cost of the premiums. Again, this is highly personal and depends on your individual needs, health, age, and the reasons you are taking out the policy in the first place.
A good insurance broker will ask you all the right questions before advising you on the best options. Unfortunately, no silver bullet applies to everybody as everyone is different and has different needs and goals. The broker will be in a position to compare similar products offered by competent underwriters and advise on the best product for your circumstances and advise on which insurance company provides the best outcome. They will also be familiar with the rates of the various companies.
Nevertheless, there is some merit in comparing whole life rates in order to get an idea of ballpark figures.
Carefully consider the amount of your death benefit and cash value – these affect your premium
Remember that the higher the death payout amount, the higher your premium.
There seems to be a presumption that one should always opt for the highest possible death benefit. However, this should not necessarily automatically follow. Sometimes the better option is for a high cash value policy and a lower death benefit value as this allows you to accumulate a lot of value quicker which also has the long-term benefit of increasing your death benefit value at the same time.
Once again, this illustrates that people all have different needs, and you need a highly customized and personalized insurance portfolio if you are to be investing wisely.
How long is a piece of string?
There is no easy answer regarding the cost of whole life insurance. Therefore, the best strategy is to see a professional and get their advice. At this time, you can compare the price between various products and consider the professional’s advice and suggestions.
Veeramachineni Lalitha
I am Finance Content Writer. I write Personal Finance, banking, investment, and insurance related content for top clients including Kotak Mahindra Bank, Edelweiss, ICICI BANK and IDFC FIRST Bank. My experience details : Linkedin