Let us take a look at term life insurance price. They can differ considerably.
Why would term life premiums be lower for one term policy than they are for another term plan?
Why would term insurance cost less than the premium you would pay for permanent plans like whole life or universal life?
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The people who design term policies
try to make these term life insurance premiums as pure as possible.
They attempt to include limited loads in the term life insurance price
as is possible.
The yearly renewable term policy is the least costly because it is life insurance for a very short period of time. Yearly renewable term is a one year term policy which you have the option of renewing each year at a higher premium. You don't have to qualify each year for the policy.
On the other hand, the 30 year term
policy costs a lot more than the yearly renewable term policy. This
policy costs more because it is for a long period of time.
Once the life insurance company approves the policy they are on the hook, they cannot take it away from you. At any time in the 30 year period, if you should die they will have to pay the face amount of the policy to your loved ones.
What the actuaries do with the 30 year term life insurance policy is to average out the costs over the 30 year period and charge you a level premium for the entire period. To put it another way the 30 year term policy is front end loaded. You are paying more in the first year that the mortality tables suggest you should pay.
If, however, you should die in the 25th year you would have paid much less for your policy, for that year, than the mortality tables suggest you should pay. Remember though that they have collected premiums for 24 years and you did not die.
As you can see this is the reason for the differences in term life insurance price.
Universal life is term insurance based so the term life insurance price explanation would apply. As there is a saving attached to universal life the difference between the term premium cost and your actual outlay would depend on how much you decide you want to save.
As you can see there are valid reasons for the differences between life insurance premium costs whether you are looking at a term life insurance price or permanent life insurance price.
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I recently did some research on the development of the 30 year term insurance policy over the years. What I learned was quite interesting.
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