Life Insurance Rate Bands: How They Can Save You Money [2024]
You can end up saving money by selecting coverage within certain life insurance rate bands. You may see these number ranges often in examples provided by insurance companies, and now we'll cover how to understand them better.
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Daniel Walker
Licensed Insurance Agent
Daniel Walker graduated with a BS in Administrative Management in 2005 and has run his family’s insurance agency, FCI Agency, for over 15 years (BBB A+). He is licensed as an insurance agent to write property and casualty insurance, including home, life, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com and Safeco. To ensure our content is accura...
Licensed Insurance Agent
UPDATED: Aug 7, 2023
It’s all about you. We want to help you make the right life insurance coverage choices.
Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance company and cannot guarantee quotes from any single company.
Our life insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different life insurance companies please enter your ZIP code above to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.
UPDATED: Aug 7, 2023
It’s all about you. We want to help you make the right life insurance coverage choices.
Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance company and cannot guarantee quotes from any single company.
Our life insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different life insurance companies please enter your ZIP code above to use the free quote tool. The more quotes you compare, the more chances to save.
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Quick Facts
- Life insurance companies use rate bands to calculate premiums for coverage
- Understanding how rate bands work can help you save money on your life insurance policy
- Shopping online and comparing quotes for life insurance coverage can also help you save money
Life insurance companies use rate bands to determine how much a policyholder will pay for coverage. Rate bands, or rate tiers, help companies group individuals into different categories for how much they’ll pay per thousand dollars of coverage.
Insurance companies offering life insurance policies typically have three or four rate bands. If you purchase coverage in the lowest rate band — often anywhere under $100,000 — you may pay a higher rate per thousand dollars of coverage than if you bought $120,000 in coverage. Insurance for different bands of money will vary in this way. How much is a band of money? We’ll cover that a little further below.
One of the best ways to get the best coverage for your money is to get whole or term life insurance quotes from different companies at different coverage levels to see how much you would pay in each scenario.
How can life insurance rate bands save me money?
When considering life insurance, one of the first things you need to determine is how much coverage you want and need. For example, there are a few different types of term life insurance available, so it’s important to understand which type would be most beneficial for your specific situation.
The death benefit or face amount of an insurance policy is significant. You need to choose an amount that covers your beneficiaries when you pass away, but not an amount high enough to where you can’t afford the premiums.
Understanding rate bands for life insurance is essential when choosing the death benefit of your life insurance policy. The band for life insurance that you choose may be different than someone else in your family, because of a number of different factors including age, as mentioned above. In most cases, band rates for life insurance are as follows:
- $1,000 to $99,999
- $100,000 to $249,999
- $250,000 to $999,999
- $1 million and up
Using rate bands to understand insurance premiums may sound confusing, but the concept makes sense when you think about actual examples of coverage.
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How do rate bands work?
In many cases, choosing a lower coverage amount can cost you more in monthly or annual rates than choosing a death benefit that’s several thousands of dollars higher.
For example, if a 30-year-old male wanted to purchase a 20-year term life insurance policy, the average rate for a $200,000 face amount would be around $195 annually. However, the same individual could get a $250,000 death benefit for about $198.50 per year. So he would essentially pay $3.50 more per year for $50,000 more in coverage.
This same thing happens at each rate band. So, choosing a $100,000 policy over an $80,000 policy would likely benefit you. The same is true when it comes to choosing a $250,000 policy over a $200,000 policy, and so on. Age can affect which band rating you choose.
Do agents help with rate bands?
If you purchase a life insurance policy through an agent, they will likely help you understand the amount you’d pay for different coverage levels. In addition, most agents want their clients to know the benefits of various policies.
Now more than ever, more people are doing their homework and purchasing policies without the help of an agent. So if you plan to buy a policy through a company without speaking to an agent, compare plenty of quotes at different coverage levels to know how much you’d pay for your life insurance coverage.
How much is life insurance in different rate bands?
Rate bands aren’t the only thing life insurance companies use to set premiums. Several factors will impact your life insurance rates, including:
- Age
- Gender
- Health history
- Family health history
- Tobacco use
- Hobbies
- Occupation
- Type of insurance coverage
- Coverage amount
The table below shows the average rates for a 20-year term life insurance policy based on a person’s age, gender, and coverage amount.
Policyholder Age $100,000: Male Average Term Life Monthly Rates $100,000: Female Average Term Life Monthly Rates $250,000: Male Average Term Life Monthly Rates $250,000: Female Average Term Life Monthly Rates $500,000: Male Average Term Life Monthly Rates $500,000: Female Average Term Life Monthly Rates
25 $14.53 $12.70 $23.27 $18.72 $34.79 $27.39
30 $14.96 $13.22 $24.59 $20.44 $37.39 $29.59
35 $17.57 $15.40 $26.09 $22.19 $40.04 $32.19
40 $21.40 $18.62 $33.72 $28.49 $54.79 $45.69
45 $26.54 $22.97 $45.47 $37.42 $79.19 $66.14
50 $36.02 $29.32 $69.59 $54.59 $126.14 $96.99
55 $50.98 $38.11 $105.72 $78.97 $203.14 $143.99
60 $84.91 $60.20 $183.79 $131.17 $355.39 $248.84
65 $144.51 $97.44 $323.42 $220.99 $625.09 $432.84
Above, you can see how insurance rate bands impact a person’s monthly rates. For example, a 25-year-old female would pay around $12.70 per month for a $100,000 policy and $27.39 per month for a $500,000 policy. The $500,000 policy amounts to less than $15 more per month or $180 more per year for $400,000 more in life insurance coverage.
Similarly, the following table shows the average monthly rates for a whole-life policy based on age, gender, and coverage amount.
Age $100,000 Policy, Male $100,000 Policy, Female $250,000 Policy, Male $250,000 Policy, Female $500,000 Policy, Male $500,000 Policy, Female
25 $94 $85 $225 $203 $444 $400
30 $108 $97 $260 $234 $514 $462
35 $128 $113 $311 $273 $617 $540
40 $154 $132 $376 $321 $745 $636
45 $191 $156 $468 $381 $930 $756
50 $235 $192 $578 $470 $1,150 $934
55 $295 $243 $728 $599 $1,450 $1,191
60 $399 $312 $989 $770 $1,972 $1,534
65 $528 $422 $1,311 $1,045 $2,616 $2,084
If you know you want a term or whole life policy and have some flexibility in your budget for how much you can spend, it’s good to shop around and compare quotes. Comparing quotes for different coverage amounts ensures you get the best coverage for your money.
Read More: What Does a $500,000 Life Insurance Policy Cost?
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How can I save money on life insurance?
Understanding rate bands is one of the best ways to get the most out of your money by purchasing a life insurance policy. However, the best way to ensure you’re getting the coverage you want at the best price is to compare quotes from multiple companies.
When comparing quotes from different companies at different coverage levels, you can see who offers the coverage you need at the most reasonable price and examine how rate bands affect your rates.
Don’t rush to purchase a policy, and if you have questions, it may be worth it to consult a professional to help you during your decision-making process.
Case Studies: How Life Insurance Rate Bands Can Save You Money
Case Study 1: The Impact of Coverage Amount on Premium Rates
John, a 30-year-old male, is considering purchasing a 20-year term life insurance policy. He explores two coverage options: a $200,000 face amount and a $250,000 death benefit. John found a $200,000 policy at $195/year, but for only $198.50/year, he could get a $250,000 policy with an extra $50,000 coverage.
Case Study 2: Rate Bands and Monthly Premiums
Sarah, a 25-year-old female, is in the market for a life insurance policy. She investigates different coverage levels to understand the impact of rate bands on monthly premiums. Sarah discovered a $100,000 policy at $12.70/month and a $500,000 policy at $27.39/month. She saw the added coverage was worth the cost.
Case Study 3: Whole-Life Policy Rates by Age and Coverage Amount
Mark, a 35-year-old male, is interested in a whole-life insurance policy. He examines how age and coverage amount affect his monthly rates within specific rate bands. Mark finds that he could secure a $250,000 policy for approximately $56.25 per month. At 55 years old, the monthly premium for similar coverage could be $356.20.
Life Insurance Rate Bands: The Bottom Line
By understanding how rate bands work, you can make your money work for you when you invest in a life insurance policy. Shop around and compare rates at different coverage levels to see how much your premium changes. If you can afford a few extra dollars monthly or annually to get $50,000 or more in coverage, you should seriously consider it.
Frequently Asked Questions
What are life insurance rate bands?
Life insurance rate bands refer to the different premium levels that insurers offer based on an applicant’s age and health. These rate bands typically have specific age ranges, such as 20-30, 31-40, 41-50, and so on, and each band has its own premium rates.
How do life insurance rate bands work?
Life insurance rate bands work by categorizing individuals into different age brackets and charging them different premium rates based on their age and health. Generally, younger and healthier individuals are placed in lower rate bands, which means they pay lower premiums, while older or less healthy individuals may be placed in higher rate bands and pay higher premiums.
How can life insurance rate bands save me money?
Life insurance rate bands can save you money by offering lower premium rates to individuals who fall into younger and healthier age brackets. If you are relatively young and in good health, you may be eligible for a lower rate band, resulting in lower premiums compared to individuals in higher rate bands.
Do all insurance companies use rate bands?
Most insurance companies use rate bands to determine premium rates for life insurance policies. However, the specific rate bands and criteria used may vary between insurers. It’s essential to compare quotes from multiple insurance companies to find the best rates that suit your specific circumstances.
Can I change rate bands over time?
Generally, your rate band is determined at the time of purchasing the life insurance policy and remains in effect for the duration of the policy. However, some insurance policies may allow for adjustments or rate reductions if certain conditions are met, such as maintaining a healthy lifestyle or quitting smoking. It’s advisable to review your policy’s terms and conditions or consult with your insurance provider for more information on potential rate band changes.
Your life insurance quotes are always free.
Secured with SHA-256 Encryption
Daniel Walker
Licensed Insurance Agent
Daniel Walker graduated with a BS in Administrative Management in 2005 and has run his family’s insurance agency, FCI Agency, for over 15 years (BBB A+). He is licensed as an insurance agent to write property and casualty insurance, including home, life, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com and Safeco. To ensure our content is accura...
Licensed Insurance Agent
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.
