How Can Life Insurance Be So Cheap?

  1. 63333 POINTS
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    Peggy Mace
    Most of the U.S.
    Life insurance is cheap because not everyone collects from it. Term life insurance has the cheapest rates, and the shorter the term, the lower the rates. However, this shorter length of coverage also reduces the chance of the insured person dying during that time. Permanent insurance costs more because, if the policy is kept, is it sure to pay out upon death at any age.
    Answered on November 23, 2014
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  2. 10968 POINTS
    Tim Wilhoit
    Owner, Your Friend 4 Life, Brentwood TN
    Life insurance is "cheap" because of people called actuaries. These skilled people are very good at calculating mortality of policy holders. Term is an easier calculation because of the specific time period. Statistically speaking only about 1% of term life insurance policies pay a death claim, because they are either cancelled early or out of term before death. Permanent policies have a much higher claim rate because of the many advantages and people tend to keep them for the whole life. These policies are much higher priced than term because of this risk.
    Answered on November 23, 2014
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  3. 624 POINTS
    BILL HANNA
    Agent, WMH Consulting LLC, Fort Worth, Texas
    Term life policies have the lowest rate because statistically insurance companies pay out death claims for only about 1% of the term life policies. Permanent policies higher cost is because of the much higher death claim percentage to the insurance company..
    Answered on August 7, 2015
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