Lower face amounts of life insurance are often needed instead of larger amounts, such as $250,000, $1 million or more. Many of the most reputable and highly-rated companies offer term coverage as low as $25,000. Rates are, of course, very cheap, and often, these policies are ideal for persons over age 50 that need protection at a low cost.
Affordable term life insurance rates are no longer hard to find. Many large AND small insurers are now making a pitch for their plans. About 15 years ago, the lowest prices came from companies you probably were not familiar with. Such as First Colony Life, CNA Mutual and Ohio National.
But now, you can add Genworth, Prudential, Transamerica and many other larger “name” companies to the list. Although Northwestern and New York Life haven't developed their brand of "cheap term" contracts yet, many Top-20 carriers are changing their portfolio to offer these niche contracts.
As previously mentioned, smaller policies have become more popular, since more carriers offer them, and the prices have reduced. Many years ago, it wasn't cost effective to purchase a $50,000 policy when a $250,000 contract was only double the cost. But with streamlined underwriting, including "no-physical" policies, you can easily obtain low face amounts of coverage at a very cheap rate.
Note: If you own an existing inforce contract of $100,000 (or more), and you would like to reduce the face amount, there is a possibility that the minimum requirement will not allow for reductions. Each carrier and contract is different and a different set of guidelines generally applies to older policies.
Also, since the cost per thousand dollars of insurance may slightly increase with a change, for example, the new $50,000 coverage may cost slightly more (perhaps 52%-60%) than the $100,000 premium.
Current Low Face Amount Prices
View (below) current monthly rates for smaller amounts of coverage at selected ages. Only "A" rated carriers are considered. Rating is based on non-smoking preferred best classification. Tobacco usage or serious health conditions will increase projected pricing.
40 Year-Old Male $25,000 Face Amount
$10.36 - 20-year Rate Guarantee
$13.48 - 30-year Rate Guarantee
40 Year-Old Male $50,000 Face Amount
$8.53 - 20-year Rate Guarantee
$16.62 - 30-year Rate Guarantee
40 Year-Old Female $25,000 Face Amount
$8.99 - 20-year Rate Guarantee
$12.39 - 30-year Rate Guarantee
40 Year-Old Female $50,000 Face Amount
$8.14 - 20-year Rate Guarantee
$15.36 - 30-year Rate Guarantee
50 Year-Old Male $25,000 Face Amount
$12.93 - 20-year Rate Guarantee
$22.98 - 30-year Rate Guarantee
50 Year-Old Male $50,000 Face Amount
$15.36 - 20-year Rate Guarantee
$38.89 - 30-year Rate Guarantee
50 Year-Old Female $25,000 Face Amount
$11.03 - 20-year Rate Guarantee
$19.58 - 30-year Rate Guarantee
50 Year-Old Female $50,000 Face Amount
$12.82 - 20-year Rate Guarantee
$27.82 - 30-year Rate Guarantee
Of course, “affordable” will have different meanings to different people. Typically, if you don’t have any major health issues and you are not more than 30-40 pounds overweight, you may be surprised at how low your rate is. Also, whole life insurance rates have become much more affordable in recent years, despite reductions in dividend scales. With mortality changing, permanent plans are becoming more popular.
Economies Of Scale
With inexpensive options, higher face amounts of coverage have become more common, as opposed to the exception. As you can see from the rates shown above, in most situations, doubling the face amount from $25,000 to $50,000 results in premium hikes of 20% or less. And yes, there are specific situations when the rate will actually decrease!
For example, a 40 year-old male pays $10.36 per month for a $25,000 20-year guarantee plan. Yet, bumping the coverage up to $50,000 actually lowers the rate to $8.53! The reason is that Genworth offers very competitive pricing at $50,000, but does not offer a lower face amount. Thus, carriers such as Cincinnati, Motorists or United Of Omaha must be used, who don't offer as competitive of a product.
The technology advancements we have recently seen have made a big difference in being able to easily and quickly show rate comparisons to consumers. In only a few minutes, you can compare hundreds of different term life insurance plans consisting of various face amounts and length of policy.
Many years ago, it would take a few days to gather the information needed for that type of presentation. In the early 1980s, when I began my career in the business, the process of providing multiple comparisons took a few weeks. Of course, there were no laptops, cell phones or iPads!
Since you can now purchase so much more insurance with fewer dollars, often, the focus is not so much on the face amount to apply for, but the length of time you will need coverage. As previously mentioned, the 20-year guaranteed term life insurance policy has replaced the 10-year policy as the most popular.
Lower Company Expenses Help Consumers
The main reason may be that rates for 20-year term insurance rates now cost about the same (or lower) than 10-year rates from 20 years ago. The drastic reduction in premium is mainly due to expensive-cutting by life insurance companies, changes in mortality tables and improvements in preventive medicine. Consolidation and elimination of some of the workforce has also helped companies lower premiums.
The combination of these factors makes purchasing longer guarantees more attractive. And since policies can still be terminated at any time, regardless of the guarantee length, policies with face amounts under $100,000 have become much more affordable.
Another reason is that many consumers that have purchased 10-year term plans in the past, have realized that a 15-year or 20-year guarantee was a better fit, based on their financial needs. With lower interest rates combined with concerns with our increasing debt problem, finding safe rates of return on investments is a bigger challenge. Thus, it takes longer to build up 401(k) accounts and other savings vehicles to the point there is enough to retire.
Affordable term insurance will help you protect the assets you have accumulated and of course, provide an income stream that help offset loss of income. We’ll help you find the policy that is perfect for your unique needs and ensure it’s the most cost-efficient way to purchase coverage.