Types of Premium in Life Insurance for Every Budget

Life insurance premiums can be tailored to fit every budget, and understanding the different types of premiums can help you make informed decisions.

For those with limited financial means, a term life insurance premium can be a more affordable option, often costing between $10 and $50 per month.

The cost of a whole life insurance premium, on the other hand, is typically more expensive, ranging from $50 to $200 per month.

If you're looking for a balance between affordability and long-term protection, a universal life insurance premium might be the way to go, costing between $50 to $200 per month.

Whole life insurance premiums can be significantly higher than term life insurance, with costs ranging from 5 to 15 times more for the same death benefit.

You could pay a fixed monthly premium for a whole life policy, which remains in force as long as you continue to pay your premiums.

The cash value component of whole life insurance can earn interest over time, but it's often more expensive than term life insurance.

If you outlive the age on your whole life policy, you'll be paid your death benefit, which can be anywhere from 90 to 121 years old.

Whole life insurance is often more complex, requiring you to work with a broker or advisor to buy a policy rather than just enrolling online.

Term life insurance is a type of policy that provides coverage for a specific term or length of time, typically between 10 and 30 years.

It's designed solely to give your beneficiaries a payout if you die during the term, and it has no cash value like whole life insurance does.

Most individual term policies have level premiums, so you pay the same amount every month.

You can choose to buy term life insurance through various methods, such as contacting a local agent or financial professional, exploring online marketplaces, or reaching out directly to insurance companies.

If you receive term life insurance through an employer, rates are typically issued "on attained age", which means the rates will increase over time.

You can use a calculator to determine the cost of term life insurance at the coverage level you want.

For most people, term life insurance is needed until the kids are grown up, the house is paid off, and there's some money that can serve as protection for the surviving spouse.

Universal life insurance is a type of permanent coverage that allows you to adjust your premiums while still building cash value and keeping a death benefit in place.

There are three types of universal life insurance: UL, IUL, and VUL. UL earns interest on the cash value component with flexible payments, while IUL ties cash value growth to a market index like the S&P 500 within top and bottom limits. VUL invests funds from the cash value component in the stock market.

Pacific Life offers UL, IUL, and VUL policies with a wide variety of investment options, but it's essential to review your policy regularly to avoid a policy lapse.

A universal life policy offers flexible premiums, allowing you to raise or lower the amount you pay into the policy as you see fit, within the limits of the policy.

Guaranteed universal life insurance is a more affordable option with a fixed death benefit but little or no cash value. This type of policy is offered by Protective with a return of premium rider at no additional cost.

Variable universal life insurance invests the cash value component in underlying subaccounts, which may increase or decrease based on the performance of those underlying investments. This requires routine review of your policy to avoid a policy lapse, especially when market conditions change.

When you're purchasing a life insurance policy, there are various premium options to consider.

You may be able to purchase a waiver of premium rider, which waives your policy's premium if you develop a qualifying disability and can't work. The qualifying conditions for this rider vary by insurer.

Researching the qualifications outlined in the policy is essential to ensure you understand what's covered.

Guaranteed issue life insurance is a type of policy that requires no medical exams and no health questions. This means you can't be turned down for coverage if you're within the eligible age range, which is typically 40 to 85.

These policies are often more expensive than other types of life insurance, and coverage amounts are generally low. If you die within the first few years of having the policy, your beneficiaries may receive only a partial payout, known as a graded death benefit.

People often buy this type of life insurance if they've been turned down elsewhere because of their health but they want to cover final expenses, such as funeral costs. This type of insurance is also a good option for those who want to cover their own funeral and burial expenses, as it's often a guaranteed acceptance policy.

The death benefit for guaranteed issue life insurance is typically capped at low amounts, ranging from $5,000 to $25,000. This is because the policy is meant to help pay for final expenses, not provide years of financial support to your beneficiaries.

Here are some of the best guaranteed issue life insurance companies, along with their NerdWallet ratings and age eligibility:

Keep in mind that NerdWallet rates insurers at the company level, not the policy level, so these ratings reflect the company as a whole, not its guaranteed issue life insurance policy specifically.

Simplified issue insurance policies don't require a medical exam, which can be a big plus for older applicants or those with serious health problems.

These policies are often designed for people who may not qualify for traditional policies that require a medical exam. Many term policies and final expense policies are either simplified issue or guaranteed issue.

You'll typically be asked to fill out a health questionnaire instead of undergoing an exam when applying for a simplified issue policy. This is a simpler and more straightforward process than a traditional medical exam.

Simplified issue policies often offer lower levels of coverage compared to other types of policies, and premiums tend to be higher because the insurance company has to assume a higher risk.

Waiver of Premium is a valuable option that can provide financial relief if you're unable to work due to a disability. This rider waives your policy's premium if you develop a qualifying disability and can't work.

The qualifying conditions for this rider vary by insurer, so it's essential to research the qualifications outlined in the policy.

Family income riders provide an additional death benefit that's paid out in monthly installments after the insured dies, through the end of the policy's term.

This feature is often purchased by sole breadwinners with a term life insurance policy. They want to ensure their family still has a regular income if the insured passes away.

For example, a sole breadwinner might purchase a family income rider to guarantee their family's mortgage payments and living expenses are covered.

Accidental Death and Dismemberment (AD&D) is a type of insurance rider that can increase your life insurance payout if your death is caused by a covered accident.

An AD&D rider can pay out a certain amount while you're still alive if you suffer a qualifying injury caused by an accident.

This type of rider is designed to provide financial protection in the event of a serious accident, and can be a valuable addition to your life insurance policy.

By adding an AD&D rider, you can ensure that your loved ones receive a higher payout in the event of your death, and that you receive some financial assistance if you're left with a long-term disability due to an accident.

Guaranteed insurability is a valuable option for those who want to secure their future coverage needs without the hassle of medical exams. This rider is most common on whole life insurance and universal life insurance policies.

It allows you to periodically choose to add more coverage to your policy, which can save you money if you think you'll want more coverage in the future.

If you're looking to get some of your life insurance premiums back, consider a return of premium rider. This rider refunds all or some of your term life insurance premiums at the end of your policy's term.

The death benefit hasn't been paid out for the rider to be effective. You should consult with a financial advisor to understand the benefits of this rider and how it fits into your investment strategy.

Adding a rider to your life insurance can increase your premium, and it's essential to quote your policy both with and without the rider to see how much it changes your price.

This is especially true for health-related riders, which can significantly impact your premium costs.

It's crucial to weigh the potential benefits of a rider against the increased costs to ensure it's worth the investment.

A cost of living rider can be a great way to protect your policy's value over time.

This type of rider gradually increases your policy's coverage amount, so you're not left with a decreased value due to inflation.

Your premium will also increase alongside your coverage amount, so you'll need to factor that into your budget.

This can be especially helpful for long-term policies, as it ensures that your coverage keeps pace with rising costs.

Adding a rider to your life insurance can be a smart move, but it depends on your specific needs. If you're concerned about extra financial support in case of a serious health condition, a health-related rider might be a good choice.

It's essential to weigh the potential benefits against the increased premium costs. A single rider can significantly boost your premium, so it's crucial to compare quotes with and without the rider.

Your policy's flexibility is key to determining whether a rider is worth it. If you think you'll need extra support in the future, a rider might be a wise investment.

Talking to an agent is always a good idea, but there are also key factors that can help you narrow down your decision.

A life insurance policy that best meets your needs is one that balances your budget with your coverage needs.

Even after learning the differences between each type of plan, it can be confusing to pick the right premium.

If you're still unsure which type of life insurance is right for you, using a tool to help you figure out your needs can be a big help.

A higher premium doesn't always mean better coverage, so be sure to research and compare different options.

Still not sure which type of life insurance is right for you?