Life Insurance - Will My Premiums Increase?

Well, it really depends on the type of life insurance policy you have on whether or not your premiums remain level. 

Premiums for a term policy may be either level or increasing. It will depend on the type of term policy you purchased. For example: With the most common type of term life insurance your premiums are level for the entire term period with a fixed death benefit amount. Or if you wanted your death benefit to increase each year, concurrently your premiums would increase each year to accommodate that increased death benefit. 

With "Guaranteed Level Premium Term Life Insurance” premiums are guaranteed in the policy to remain level for a specified period of time and may increase thereafter. With most term life coverage, your premiums start out lower than comparable permanent coverage and stay fixed for the initial term. However with term policies if you choose to keep your policy in force past the initial locked in term period, then the premiums will likely skyrocket at the end off your initial term. The reason is that the term policies are designed to basically just cover the specific number of years it was initially designed for to keep premiums inexpensive. So when you buy Guaranteed Level Premium Term life insurance, the company can’t increase the rates during the initial term. For example: if you buy a 20-year term policy, your premiums are fixed for 20 years. However after the 20 years, your premiums could skyrocket up if you chose to keep that same policy.

With permanent life policies such as Whole Life or Guaranteed Universal Life, as long as you don’t let your policy lapse, your premium amounts are guaranteed not to increase for the rest of the owner’s life.

Keep in mind that Universal Life policies and other permanent life policies can be structured in a number of different ways. They generally all use premiums to build up a cash value that contributes to the death benefit, but how that money grows can differ. Some Universal Life policies offer a "no-lapse guarantee" which secures the death benefit and fixes the cost of your premiums over the life of the policy. Then there are other policies that are without the guarantees, often cheaper and project a growth rate based on historical calculations that, they claim, should keep premiums steady and build up a large death benefit over time. However when those projections don't pan out, policyholders can be left with very little to show for their years of premiums. An example of this is when many people who bought their policies in the 1980s, when interest rates were high, and now due to interest rates being low, the balances did not grow fast enough to cover the cost of the policy, let alone build a death benefit. As a result, balances may have actually decreased as the insurance company deducted money to cover the annual costs associated with the policies. If the balance hit zero, then the policy lapsed and any death benefit with it evaporated. The issue was that many longtime policyholders never understood this variable nature of the insurance when they signed up. Most people didn't find out about this problem until they received a letter telling them that their cash value was zero, and in order to continue their policy they had to increase their payments! That is why it is very important to have a No-Lapse Guarantee Universal Life policy to avoid this type of situation from happening to you.

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Note: Life Insurance information can be confusing to many people. As an "independent licensed agent" I can explain things to you in simple terms so you feel comfortable making a decision. Then I can help you choose a life insurance policy, from many choices of different insurance companies, that you feel fits your needs. Plus if you choose to work with me you will have personalized service by a local agent that can shop premium quotes for you. If you would like my assistance to discuss and/or start the process of getting you insured please call me at 941-404-5334. 

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