when you buy a term life insurance policy the insurance company determines the premium based on the policy s value the payout amount and such factors as your age gender and health other considerations affecting rates include the company s business expenses how much it earns from its investments and mortality rates for each age 2
in some cases a medical exam may be required the insurance company may also inquire about your driving record current medications smoking status occupation hobbies family history and similar information if you die during the policy term the insurer will pay the policy s face value to your beneficiaries this cash benefit which is not typically taxable may be used by beneficiaries to settle your healthcare and funeral costs consumer debt mortgage debt and other expenses 3 however beneficiaries are not required to use the insurance proceeds to settle the deceased s debts if the policy expires before your death or you live beyond the policy term there is no payout you may be able to renew a term policy at expiration but the premiums will be recalculated based on your age at the time of renewal term life is usually the least costly life insurance available because it offers a death benefit for a restricted time and doesn t have a cash value component like permanent insurance has for example data from insureon shows that a healthy non smoking man aged 30 could get a 30 year term life insurance policy with a 500 000 death benefit for an average of 30 per month as of february 2023 at age 50 the premium would rise to 138 a month in contrast here s a look at rates for a 500 000 whole life policy which is a type of permanent policy meaning it lasts your lifetime and includes cash value as you can see the same 30 year old healthy male would pay an average of 282 a month at 50 he d pay 571 most term life insurance policies expire without paying a death benefit that lowers the overall risk to the insurer compared to a permanent life policy the reduced risk is one factor that allows insurers to charge lower premiums interest rates the financials of the insurance company and state regulations can also affect premiums in general companies often offer better rates at the breakpoint coverage levels of 100 000 250 000 500 000 and 1 000 000 