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Factors Used In Calculating Term Life Insurance Quotes
By Darren
Obtaining a term quote generally isn't that complicated. If you are in excellent physical condition, then your most difficult task will be deciding which term quote is worthy of pursuing.
However, if you're looking for term but have pre-existing medical conditions, the process likely will be more involved.
Besides looking at how healthy you are, your term quote will vary based on two other important factors: the coverage you seek and the term.
While it might seem appropriate to arbitrarily select a figure for each of these categories, it's advisable to put some thought into each. When filling in the term and the coverage on your term quote application, consider the following.
Understanding coverage
Coverage is the amount the policy will pay to beneficiaries as a death benefit. It will be paid as a one-time, lump sum payment and it should be enough to enable them to live as they are accustomed to living. Do you know how much coverage will be sufficient? Ten thousand sounds like a decent amount, but in reality, it isn't.
Most agents will advise you to select an amount of coverage equivalent to your current income multiplied by the number of years until you retire. That provides a good baseline for your quote, but you might want to factor in a few other circumstances, beginning with the realization that your family's expenses may change over time.
While your current salary is (hopefully) sufficient to
cover your current expenses, it may not be enough in the future. End of life costs alone will set your family back thousands.
And how about this? What if your spouse had to return to school in order to get a better-paying job? College tuition right now is seeing double-digit increases every year and that's not likely to change. Also consider how life will change if your spouse, who may not work now, has to return to the work force in your absence. Such a change likely will create many new expenses.
One thing many applicants don't consider when requesting a term quote is the rate of inflation. It's certain to have an impact on the cost of goods. You should also realize that the lives of your surviving beneficiaries will change.
You cannot predict how, but you need to consider there may be marriage, family additions, new cars or homes and other such changes later on.
Selecting the term
Figuring out an appropriate term is not as difficult, but will impact your quote. If you have children you might choose a 15-or 20-year term. That will protect them until they're 18 or have completed college.
If you're older with adult children, consider the average life expectancy of your family to help determine an appropriate term.
And remember, you can increase or decrease these two factors on your term quote until you get the most coverage you can afford.
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