Los Angeles 7/12/2012 10:41:41 PM
News / Finance

Term life insurance quotes are all about years

Paramount Life Insurance News

Los Angeles, California Life Insurance News -- Unlike some other insurance products, term life insurance quotes are closely tied to time, to years. Specifically, term life is about a set period of time—a term, in a word. Whole life, by comparison, is about a person’s whole life, from the inception of an insurance policy until the policy holder dies. Because length of life varies, whole life policies are of varying length.

But term life insurance quotes are inextricably linked to a designated period of time, usually broken into five-year segments. Actually, a term life policy can be taken out for as short as one year, but more commonly they cover five, ten, up to 30 years. Obviously, the policies are taken out for different terms for different reasons, but each policy ultimately is perishable.

So premium quotes range widely. An actuary for an insurance company knows a one-year policy for a healthy 25-year-old person has a slim chance of being redeemed. For the insurance company, the policy is likely to be all premium intake and no claim payout. Consequently, because risk is low, the premium for the policy will be low as well.

On the other hand, a 20-year term policy for a 70-year-old man poses all kinds of risk for the insurer. Normal aging issues, cumulative damage to the body from a lifetime of activity, slowed reaction times in emergency situations—all these ratchet up the possibility of the policyholder dying before the policy’s term ends. Therefore, the premium will be high.

Term life insurance quotes thus are linked to years—the years of life of an applicant, the likely years of vigor remaining in the applicant’s life, the number of years requested in a term life insurance policy. While the health of an individual as determined in a health exam is relevant in the premium-making process, ultimately the years involved will decide the matter.

Therefore, term quotes that seem to ignore the issue of years and offer unbelievably inexpensive and long terms for late-in-life applicants should be viewed suspiciously. If the company is in the habit of making promises it cannot afford to keep, it is not apt to be around long enough for a policyholder’s next of kin to collect. Be wary.