Cheap Term Life Insurance Alabama AL

Reader’s Question:

Why does a $100,000 – 10 year level term life insurance policy seems to be cheaper that a $50,000 – 5 year level term life insurance policy in Alabama?

Ruth

Decatur, AL

That’s a tricky question, Ruth.

You’re question is kind of a brain twister one. However, I can quickly guess for 1 main reason: competition among life insurance companies. It is basically the law of supply and demand.

You see, there are more companies that offer $100,000 term life insurance policies which increases price competition for policies of this size. Only few life insurance companies offer as low as $50,000 term life insurance companies in Alabama.

When it comes to term of coverage, most 5 year level term life insurance policies available do not offer a guaranteed level premium after year five. What makes it very costly in the long run is the annual increase in premiums beginning in the 6th year if it is kept for 10 years. Therefore, the 10 year level term life insurance policy becomes a cheaper life insurance policy option if you intend to be insured for 10 years.
You see, I can give you an example to illustrate this more clearly. Let’s say John, who is a non-smoking male, age 35, with no medical condition, living in Alabama gets to choose between a cheapest term life insurance policy premium $50 000, 5-year term and a cheapest term life insurance policy premium $100 000, 10-year term. He intends to get coverage for a total of 10 years. Which one is the cheaper life insurance for him?
If we are to assume that the rates are guaranteed, then his total premium for the 10-year period is $1,924 for $50 000 of life insurance. On the other hand, his premium for the $50 000 policy for the 1st-5th year will be $68 per year, however, premiums for the 6th year will be $279, $297 on the 7th, $315 on the 8th, $336 on the 9th, and $357 on 10th. The annual premium of a 10-year policy is $72, which therefore makes his total cost over 10 years $720 for the $100 000 term life insurance policy.

If you got the math there, then I think you’d agree if I’d say, $100 000 is the cheaper term life insurance policy.

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