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It's
important to understand that there are
price points or certain
amounts of term life at which the
average dollar per coverage drops.
It's the closest equivalent to a "bulk
discount" that life insurance carriers
offer. Let's run some quote and
take a look at how this works.
First, each carrier has different
pricing models but there are some key
price points that usually hold true.
As long as you can afford the monthly
premium, a key concern when picking the
right
life insurance plan is the cost per
dollar of coverage. This is very
different from the premium amount you
pay. Let's take a quick look at an
actual quote we ran to show the cost per
dollar.
Age 40; 20 year term; average term life
rate
Term
amount
monthly premium
price per $1000 of coverage
% difference
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So
let's break down these figures.
First, let's look at the first two
columns. If this person buys
$100,000 of term life insurance for a 20
years term, the cost would be 13 cents
for each $1000 dollars of coverage each
month. This is still very
inexpensive for life insurance coverage.
Now, look at the second column.
If this person buys an extra $100K for a
total of $200K (double the initial
amount), then the cost per $1000 of
coverage is 9 cents. That a huge
44% savings when comparing the key
metric of cost per dollar of life
insurance coverage. You would much
rather pay 9 cents than 13 cents.
What this means is that if you can
afford either monthly premium ($18 or
$13), then you are getting a much better
value going with the $200K.
On
the next step up, there is a 28%
discount going from $200K to $300K in
coverage. That a difference of 9
cents per $1000 of coverage versus 7
cents. The monthly
term life premium
difference would be $18 versus $21.
28% is still a pretty big discount.
As
you keep working down, the discount
percentage drops with each extra $100K
of coverage but there's still a
discount. If you can afford the
100K-500K level, there's a strong reason
to look at the $500K or $600K range
assuming this meets your term life
amount needs. It's still
amazing that a 40 year old can look at
around $40/monthly for $750K of
coverage. Term really has become
pretty inexpensive over the years.
The discount starts to narrow as you get
into higher amounts but keep in mind
that a) it still exists and b) it is
applied to a much higher amount of term
life coverage. For example, with
$1M of coverage costing $59 monthly, a
doubling of this cost would be $118.
Instead, $2M of coverage is $113.
Ultimately, your
life insurance
needs dictate how much to buy
but it's smart to understand how these
price point discounts work among
different levels of coverage.
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