Friday, July 26, 2013

Calculate Life Insurance Coverage Rates

Life insurance comes at different costs depending on the buyer.

Life insurance is sold under a few different types of policies. Term life and mortgage insurance are temporary policies that remain in force over a fixed period of time, usually to cover the cost of a homeowner's mortgage for a surviving spouse. Whole life and universal life policies build cash value and remain in effect until the death of the insured, or a payment for the cash value in the policy is requested by the insured. Life insurance premiums are calculated with software on scales based on the coverage and the applicant.


1. Determine the amount of life insurance you need to leave surviving relatives enough support to retain their lifestyle without your income. All existing debt should be taken into consideration along with financial goals such as business ventures, college funding and additional property purchases. The amount your spouse is paid in claims should cover all such expenses and provide continuing support. Choose a term life policy that provides temporary coverage, or whole life or universal life for continual coverage with an investment plan.

2. Use the scale grid, or online rate calculator provided by your underwriter, to determine your cost for the type of policy and the amount of coverage needed. Start with the figure for coverage amount. We'll use $250,000 in this example. The low scale annual premium for this coverage is $250, but it will cost more depending who it is purchased to cover.

3. Make the first adjustment on the scale to consider the age of the applicant. A 30 year old pays the low scale rate in the example, but slide a finger over to the rate column for a 50 year old to see that she pays over $1,000 per year for the same amount of coverage. If the policy is written to cover a span of 30 years or more, then death rates show that there is a strong chance the death benefit will have to be paid within that time for a 50 year old.

4. Use the smoker's scale for tobacco users. This may be an entirely different sheet. The whole scale changes for an applicant who uses tobacco. Rates are higher for every age and situation when the insured person smokes. Tobacco use brings about early death benefit payments.

5. Move to the various columns showing rates for those with medical conditions. Cancer, lung disease heart attacks, alcoholism, diabetes and other conditions push the rates up as the premiums are displayed on columns further away from the first list. Some conditions will disqualify the applicant from receiving coverage.

6. Factor in height and weight. There is a preferred weight rate for each height. There is also a regular rate and another listing for those who are considered to be overweight. Each of these shows in a different column with slightly differing rates.

7. Change the scale rates for various hobbies and occupations. Lifestyle and safety considerations move the quoted rates to still other columns. Private pilots, bartenders and professional hockey players pay more for life insurance than office clerks. Anyone convicted of drunk driving, or other hazardous moving violations will have elevated rates as well.

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