When one of your monthly or yearly expenses increases, it can throw off your budget. While you may not be able to control how much your rent, utilities, or other costs increase, you can keep one expense the same: your life insurance premium.
You may not consider life insurance as an essential household expense in the same way that groceries or utilities are. But if you have people who depend on you financially, it’s vital to provide them with a way to cover their basic living expenses when you’re gone. Life insurance can also help them pay for your final expenses and allow you to leave a financial legacy.
With the right life insurance policy, you can lock in your premium for as long as you have the coverage, making it easier to manage your budget. Here’s a closer look at the policies that offer this benefit and what to consider before buying.
Locking in Term vs. Permanent Life Insurance Premiums
You can buy two main types of life insurance: term or permanent. Both categories include policies that allow you to lock in your insurance premium to varying degrees.
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Term Life Insurance
With a term life insurance policy, you get coverage for a specified period (or term), usually 15, 20, or 30 years. If you pass away during that time, the plan will pay out the death benefit to your beneficiary.
The term length determines your premium, and your premium stays the same throughout the coverage period. For example, if your policy is for a 20-year term, your rate won’t change during those 20 years. However, if you choose to renew your coverage at the end of that term, you may have to pay a higher rate.
Permanent Life Insurance
With a permanent life insurance policy, your coverage continues through your entire lifetime. That means your beneficiary will receive the policy’s death benefit no matter what age you pass away.
Some permanent life insurance policies let you lock in your insurance premium for a lifetime. That means the rate won’t go up as you get older or if you develop health problems, which can happen when you renew a term life policy.
Locking in Your Insurance Premium for Life
A whole life insurance policy (also called ordinary life insurance) is the most common type of permanent life insurance. It gives you lifelong coverage, and your premium stays the same for the life of your policy.
Most whole life policies also offer another key benefit: A portion of your premium goes toward the insurance cost while the rest goes into a cash value account that earns tax-deferred interest. If you decide to end your policy, you’ll receive a payment based on the cash account’s current value. Most whole life insurance plans also allow you to borrow money from the account without decreasing the death benefit, as long as you repay the loan.
Benefits of Having Your Insurance Premium Locked in
Because of its lifetime coverage, whole life insurance is typically more expensive than term life. But being able to lock in your premium may help you offset that extra cost by:
- Making it easier to plan and stick to your budget.
- Lessening the impact of increases in other expenses like health care, food, gas, and utilities.
- Leaving you with more cash to handle emergencies and save for long-term goals.
Your age is a major factor in the premium you pay for whole life insurance. If you purchase a policy at a favorable rate when you’re still relatively young, locking in that rate can give you significant savings.
Planning for Your Family’s Future
If you think a whole life insurance plan may be right for you and your family, start planning now so you can maximize the benefits of a locked-in premium. Learn more about your life insurance options at Colonial Penn.
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Colonial Penn has specialized in making life insurance simple and accessible by offering it directly to consumers since 1957. Click here to learn more.
