What determines the amount I pay?

A multitude of factors, so let's start at the beginning.

There are three main deciding factors that dictate how much a life insurance policy is going to cost someone: their age, their health and the size of the policy. It is difficult to say which is more impactful because it is more than certainly a case-by-case basis, so let's run through some examples-

1. Age

A $50,000 whole life policy for an infant would cost less than $150 annually, and the same policy would cost someone over 80 with diabetes and heart issues would pay likely 1 1/2 times that per month. The first question that comes to mind is, "Why the hell would anybody pay $150-$300 a month for a life insurance policy?", and the answer requires some arithmetic and a reality check.

The truth is that an 80 year old is already 5 years above the life expectancy for an American male, and 1 year away as a female. The odds that they pass away any day now are very high, and this gamble is costly for any insurance carrier they are planning on signing with. In the grand scheme of things, if someone pays $225 a month for a $25,000 life insurance policy at age 80, there will be 9 1/4 years before the monthly payments in total have reached the death benefit of the life insurance policy, so does this mean that after 9 1/4 years, they are wasting their money? Yes, if there was no cash value built up in the policy, which there is in every whole life policy, so no, it actually is not simply a waste after that point.

If the insured on a life insurance policy outlives a reasonable payment period, then the cash value is surrendered and the policy closes. "Reasonable payment" technically isn't an industry insurance term, but for the sake of simplicity, reasonable payment is used in this article to describe when it simply doesn't make sense to have the whole life policy anymore. This only occurs when the accumulated cash value is equivalent to the death benefit of the policy in a whole life policy. After that point, if the insured is still living, the cash value can be surrendered to the policy owner and the insurance policy would close.

This isn't mandatory and the policy can be kept alive if the policy owner chooses. In a universal life policy for example, one of the main goals is almost to accrue as much cash value as possible by placing gains market trends for more income than just what is contributed by the policy owner. In this case, the policy owner would not care if the cash value surpasses the death benefit, and it would in fact be a good thing.

2. Health

Obviously, a life insurance carrier is greatly concerned with the health of their clients when deciding how much they are going to end charging them. Weight, smoking, and the big 5 are the largest dependent variables when calculating a premium payment. The insurance carrier is typically not concerned with Body Mass Index (BMI), but instead strictly the number. Smoking can change a premium payment by multiple dollars in either direction, and the big 5 are the most important- these often decide if someone is picked up by a carrier at all or not.

Heart Attack, Stroke, Diabetes, Cancer and COPD/Lung Disease. Having either of these does not make someone entirely ineligible, but it would change their options and require a bit more work on the side of the agent to match their client with a life insurance carrier who best suits their needs. These 5 health factors more often than not have a lower life expectancy that come with them, and that is something any carrier will take into account when calculating premiums. Not all hope is lost though, on the contrary- there are life insurance carriers that we at Honors Insurance are contracted with that write specifically for people with these conditions to give them an option that fits their budget and health situation.

3. Size of the Policy

The final largest indicator of how much a premium payment will be is the size of the policy. This one is the most simple to calculate, and can be changed on the spot with an agent. There isn't much to write here- the larger the death benefit, the more the expensive the premium.

What you can do

Almost everybody can qualify for a life insurance policy through Honors Insurance. When you reach out to your agent, be honest with them. Lying on a life insurance application is not only not going to work since the carrier will check medical records against the social security number of the applicant, but if they are caught intentionally withholding information they might be barred from applying with that company in the future, and even put the agents license at risk. Be open and honest with your agent, and remember- they have always heard worse.