What Are Life Insurance Rate Bands & How Can They Help You Save Money?
You must be thinking, what is a life insurance rate band? Insurance companies have been
using them for decades, and here is how rate bands work. All the companies use the concept of rate tiers to calculate premiums for life insurance.
Depending on the company, these tiers are divided into 3 to 4 main categories. Each of these bands contains a rate per thousand dollars in life insurance coverage. The philosophy is that the more you buy, the lower the rate per one thousand dollars of coverage.
If you are looking for low-cost life insurance quotes, this information can help you reduce your premiums. Keep in mind that these are also known as “banded rates.”
Table of Contents
- What Are Life Insurance Rate Bands?
- How Can I Use Rate Bands to Reduce My Premiums?
- How Can Life Insurance Rates Bands Be Used?
- Examples of How Rate Bands Work
- The Three Main Types of Life Insurance to Consider?
- Who Wants to Pay Any More Than They Have To?
- Your Time is Valuable, So Put It to Good Use
- Become a Smart Life Insurance Buyer
- Utilizing Our Website Quoting System
- In Conclusion
How Can I Use Rate Bands to Reduce My Premiums?
One of the first decisions a life insurance applicant must make is how much life insurance they need. This refers to the face amount, otherwise known as a death benefit. A face amount is a number you must carefully choose so you are adequately insured. Most of the time, consumers pull a number out of their heads with little or no thought. I have found that many applicants will ask for a $200,000 face amount. Essentially, $250,000 will cost less than the $200,000 they just mentioned.
Remember that this is where their agent comes into the picture. Their agent should help them choose a face amount where a rate band with help them buy more life insurance for less money. We will go into more detail as we move along in this blog post.
The most competitive life insurance companies begin with a minimum of $100,000. If you use a quoting system such as ours and quote $50,000 or $75,000, you eliminate the carriers with the most competitive rates. You are also missing out on the very first-rate band discount.
How Can Life Insurance Rate Bands Be Used?
Suppose you are shopping for affordable life insurance quotes and are interested in purchasing less than $100,000 coverage, such as $50,000 or $75,000. The rates per thousand will be at the very highest point.
The rate band will reduce your rates if you ask for $100,000 coverage. This is because the very first-rate band commonly starts at $100,000. This will typically be the case for up to $249,000 in coverage for this face amount.
The next rate tier will typically be ($250,000 to $499,000), allowing you to save more money per one thousand dollars of coverage. A good example at this point is if you are planning on purchasing a $250,000 face amount, you will be taking advantage of the second-rate tier band. This is because you will now be paying even less per thousand, which means you will purchase more coverage for less money again and to a higher degree than before.
Examples of How Rate Bands Work
The very first rate discount begins at $100,000 to $249,000. Here is a widespread request for $200,000 and the savings by just going to $250,000 as an example.
We will use an applicant who is 30 years old and wants to purchase a 20-year term policy. He wants to know his options
for face amounts and premiums. The applicant asks his agent to give him a term quote for a $200,000 face amount with an A+ rated company.
We will use a very competitive Banner Life insurance company in this example. The applicant’s premium would be $191.98 for a $200,000 face amount.
Example: of using a $250,000 face amount instead of $200,00
In this example, a $250,000 face amount will be $193.99 per year. This breaks down to only $2.01 for an additional $50,000 life insurance coverage. So most of the time, the $250,000 will cost less than the $200k policy.
Example: of going from $400,000 to $500,000
Here is another excellent example, a face amount of $400,000 would cost $274.38. However, a bump to $500,000 would cost only $318.99, which would break down to an extra $100,000 coverage for only $44.61 per year. Does that sound good? You bet it does.
Example: of a $900,000 face amount to $1,000,000
The last example for you would be. If this individual were interested in a $900,000 20-year term policy from Banner Life, the premium would be $526.18. A simple face amount increase to $1,000,000 would be $563.99. This would represent an additional $100,000 in coverage for only $37.81 per year.
*This means an additional $37.81 for an extra 100,000 a year, not a month, a year! You can now see how rate bands can considerably save premiums.
A $1,000,000 Face Amount Has Even Greater Savings!
A $1,000,000 face amount is much more affordable than you think due to even additional rate discounts.
Looking at this final breakdown of premiums, we will see a rate of 96 cents per thousand dollars in coverage vs. the first quote of a $200,000 face amount.
This last quote of a $1,000,000 policy would break down to a rate of $.37 per thousand. This is close to 1/3 the cost between these two face amounts. To summarize the premiums, we went from a rate of $.96 per thousand of life insurance coverage to $.37 per thousand by taking advantage of the rate band effects.
Taking advantage of the rate bands can make a considerable difference in premiums dollars and allow you to buy more life insurance for less money. We always consider this when we are working with our clients. This is one of the many ways and advantages an independent agent can help you secure the best policy for the lowest premium.
Who Wants to Pay Any More Than They Have To?
Nobody wants to pay more than they have to, so use these rate bands to your benefit and save some money.
Purchasing life insurance is just like any other product or service. You don’t want to pay any more than you have to.
Using life insurance rate bands to your advantage is one way.
Another way is to make sure you choose the best life insurance companies for your needs and budget. Premiums vary from one company to another, so you have to shop the market and choose the carrier that will offer you the lowest rates available. This will mainly depend on your health history. Your agent can do all this work for you quickly and easily.
This is why the most important asset you will have is the agent you will be working with. Paying a life insurance premium is not a one-payment event. Payments are due year after year, just like a mortgage. That is why you have to get the lowest premiums possible.
Three Main Types of Life Insurance to Consider
Your three main options to consider will be:
- Term Life Insurance – Learn More
- Universal Life Insurance – Learn More
- No Medical Exam Life Insurance – learn more
You should always know your options to make an educated buying decision. All three of these types work the same way as rate bands. You can click on the links to learn more about each product type.
To cut through all the smoke related to the different types of life insurance. You will find that affordable term life insurance will be the most cost-effective with no close second.
Remember that Whole Life insurance is no longer cost-effective by today’s standards. Universal Life is the number one product for permanent life insurance products. Term Life insurance is the most purchased life insurance product due to its affordable premiums.
Your Time Is Valuable, So Put It to Good Use!
Most consumers make buying life insurance difficult and spend weeks looking at the same redundant rates over and over. Well over 50% get frustrated and give up without ever applying.
Most consumers go online and bounce from one website to another, looking at premium quotes. However, the one essential concept you must remember is that life insurance rates are regulated by law.
This means no agent or broker can sell the same insurance product from one carrier for more or less than another. Consumers can also compare term life insurance quotes from multiple website quote engines when rates are the same.
They all get more confused each day until many (approximately abandon purchasing life insurance altogether.
Become a Smart Life Insurance Buyer & Let Your Agent Do All the Work for You
Like the telephone companies used to say, “let your fingers do the walking.” Pick up the phone, call an independent agent like us (708-334-6226), and let us do all the work for you.
Instead of getting more confused looking at numbers and companies you don’t understand, ask for help. A professional can point you in the right direction in just minutes.
If you have any medical conditions, we can run a 5-minute medical pre-screen before you apply, so there are no surprises later. Unfortunately, many agents will not take the time to pre-screen potential applicants, resulting in an unwanted surprise during the underwriting process.
Use Our Website’s Quoting System to Compare Rates
Take advantage of our quoting system that will instantly display over 40 of the highest-rated life insurance companies in less than a minute. It will also help you visualize life insurance rate bands when comparing face amounts. Of course, you will need help choosing the right company to apply with, but your agent can help you choose the right one.
The most crucial issue will be choosing the carrier that will provide you with the best health classification, and we can help you with that right over the phone. Therefore, selecting a suitable company is critical when shopping for the best life insurance rates.
All companies underwrite applications differently, so choosing the right company to fit your specific profile is very important.
In Conclusion
You must have many questions you would like answered, so don’t be afraid to ask. You are welcome to call us seven days weekly, from 9:am to 9:pm
. We use quick and straightforward telephone applications to simplify the job if you decide to apply.
I hope this blog post on life insurance rate bands has answered a lot of your questions.
All the best,
Jack Venturi
708-334-6226
If you have questions about life insurance rate bands, contact us today and let us help you with no cost or obligation. We are brokers that work for our clients, not the insurance companies. Our job is to help you get approved for the best policy at the lowest cost. You can also set up a specific time to get all your questions answered.
