Voluntary term life insurance is one of the myriad of types of life insurance. It is a policy that offers protection for a limited time, such as 5, 10, or 20 years. An increasing portion of today’s workforce is being drawn to these policies because of their lower cost when compared to whole life policies. As a financial manager, it is important to know these types of policies well to recommend them to your clients. In fact, they may expect you to explain life insurance misconceptions. Also, compare your clients’ initial investment to the benefits they will receive from the policy. Read on to discover main voluntary term life insurance factors to determine coverage costs.
When working with clients, age makes a significant impact on term life insurance coverage cost. Premiums are dependent on age and increase over the length of the policy. Depending on the term life insurance provider, the price will increase either annually or every five years. Premiums tend to increase with risk of injury or death, and that risk increases with a person’s age. Therefore, recommend voluntary term life insurance to younger, lower-risk clients. If they are high risk, you can suggest cheap life insurance for seniors. This can prove to be a prudent financial decision at the end of a several year term. Surely, your client’s age is an important factor in determining voluntary term life insurance costs.
Any dependents your client may have will also impact coverage costs. Recommending voluntary term life insurance to younger parents will ensure an adequate payout to their children in the event of their untimely death. Term length needs, and therefore the premiums, of a policy will change depending on the number of children and their age. For example, a 20 year term would be great for a client who just had a baby. It will keep them insured until after their child reaches the age of maturity. However, an extended term like this will cost more. Surely, taking your client’s dependents into account is a factor in determining voluntary term life insurance costs.
The medical history of your client is another factor in determining coverage costs. Voluntary term life insurance is unique in that it is guaranteed issue. Your client is not required to submit their medical records to receive the policy’s most basic benefits. However, many voluntary term life policies have additional benefits that may be impacted by the client’s medical risk. Higher-risk clients may only be eligible for voluntary term life policies. Many would benefit most from the highest quality policy they can find, and would be willing to spend a larger sum on it. Therefore, voluntary term is a great option for clients with certain medical conditions that would exclude them from traditional policies. Absolutely, your client’s medical record is another factor in determining insurance coverage costs.
Your client’s income level is a fourth factor in determining voluntary term life insurance coverage costs. These policies provide a cash benefit to help with day care costs, mortgages, and similar expenses. Think about how well your client’s income covers these costs to begin with. Of course, they will need a higher-premium policy to cover these expenses if needed. Note that these policies are typically purchased when clients’ family financial responsibilities are the greatest. Otherwise, you may have to recommend a low income insurance plan. Typically, clients will be willing to spend a larger portion of their income to provide peace of mind for their family’s finances. Your clients’ income bracket is surely a consideration to make when determining coverage costs.
The security and stability of your client’s employment is the final factor in determining coverage costs. Often times, voluntary term life policies are offered through employers. If they lose or otherwise change their job, they may lose their voluntary term coverage. Sometimes these policies are convertible after employment ends, but doing so is often expensive. In addition, conversions often require further proof of your client’s insurability. As a result, keeping a stable, secure job will ensure your client’s life insurance costs are kept low. Job security is an incredibly important factor in determining costs of coverage.
Determining the cost of voluntary term life insurance requires taking many factors into account. The first is the age of your client, as older people are more at-risk of injury and death. A second factor to consider is the number and age of your client’s dependents, as they may require more coverage. Third, consider your client’s medical history. Fourth, take your client’s income into consideration. Finally, think about how secure your client is in their employment. Consider all five of these factors in order to best determine the coverage costs of voluntary term life insurance.