Life Insurance Rate Bands: Your Key to Saving Money in 2025 + YouTube Video
What are life insurance rate bands? You’re very likely to be pondering the concept of life insurance rate bands and how they work. Introduced
by insurance companies long ago, they are essential tools to help you secure the most favorable life insurance rates.
The primary objective when buying any product or service, including life insurance, is to minimize the amount paid.
Otherwise known as banded rates, they represent savings opportunities that are readily available to those in the know. Few consumers I’ve encountered are aware of their existence, let alone utilize them effectively.
We will go into the life insurance rate bands in detail so you can understand how they work and how you can save money by utilizing them. Keep on reading because the best is yet to come!
Table of Contents
Reducing Premiums Through Rate Bands
Life insurance rate bands offer premium discounts on units of face amount (death benefits). These discounts help insurers determine rates based on the coverage amount the applicant is applying for.
As the face amount increases, the per-unit cost of coverage (cost per $1,000 of coverage) normally decreases once it graduates into a higher rate band.
This pricing structure allows applicants to purchase higher face amounts of coverage at a lower cost factor.
Life Insurance Premium Ranges
Rate bands can vary slightly with each life insurance company, but here is how they are applied.
Rate Band #1:
Face amounts up to $250,000 would have the highest cost per $1,000 of coverage.
Rate Band #2:
Face amounts from $250,001 up to $500,000 would be an additional lower cost per $1,000 of coverage.
Rate Band #3:
Face amounts from $500,001 to $1,000,000 would reflect an even lower cost per $1,000 of coverage.
Rate Band #4:
Face amounts that would be over $1,000,000 would offer the lowest possible cost per $1,000 of coverage.
What Is the Purpose of Using Life Insurance Rate Bands?
Rate bands provide financial incentives for individuals to promote higher face amounts per policy. Discounting the cost of life insurance for higher face amounts makes it more appealing for applicants to raise their level of coverage.
By using life insurance rate bands, both the applicants and the carriers benefit. Applicants would receive more coverage for a lesser cost and insurers would generate more revenue from larger death benefit policies.
How to Secure the Lowest Term Life Insurance Rates in 2025: YouTube Video
Life insurance companies begin with the first rate band of $100,000. Purchasing a policy with a face amount under $100,000 will cause you to pass up your very first discount.
Life Insurance Premium Tiers
Suppose you are shopping for life insurance and are interested in purchasing a policy with a death benefit of less than $100,000 of your policy face amount, such as $50,000 or $75,000. The rate per thousand of coverage will be at the very highest point and your rates will not qualify for any discounts.
The rate band will reduce your rates if you ask for $100,000 of 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 classification.
The next rate tier will typically begin at $250,000 allowing you to save more money per 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 tier of discounts.
This is because you will now be paying even less per thousand, which means you will purchase more coverage for less money. Read below to see what happens at the next level of death benefits.
*Life insurance premiums are often categorized into rate bands, also known as banded rate discounts.
Types of Policies Insurers Apply Rate Band Discounts
All forms of life insurance plan designs utilize rate band discounts. Most people by far purchase term life insurance because of the low cost. Here is a list of the main plan designs that utilize these money saving discounts.
The links below will take you to a blog post for each type of policy for more information:
*Return 0f Premium Life Insurance
*No-Medical-Exam Life Insurance
*Universal Life Insurance
*Final Expense Life Insurance
Examples of Using Life Insurance Rate Bands to Reduce Your Premiums
The very first rate discount begins at $100,000 and goes up to $249,000. Our sample applicant 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 quote for a $200,000 face amount with an A+ rated company.
We will use Banner Life as an example. The applicant’s premium would be $191.98 for a $200,000 face amount.
Example #1 – $200,000 face amount vs $250,00
In this example, a $250,000 face amount would be $193.99 per year. This breaks down to only $2.01 for an additional $50,000 in life insurance coverage. So most of the time, the $250,000 will cost less than the $200k policy.
Example #2 – $400,000 vs $500,000
This example reflects a face amount of $400,000 which would cost $274.38. However, a bump to $500,000 would only cost $318.99 which would break down to an extra $100,000 in coverage for only $44.61 more per year. Does that sound good? You bet it does.
Example #3 – $900,000 vs $1,000,000
This next example reflects this individual and 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 increase in face amount for the year, not a month for a year! You can now see how rate bands can considerably reduce premiums.
The affordability of buying a $1,000,000 life insurance policy is surprising, given the substantial discounts on premium rates.
Compare Life Insurance Rate Bands With Our Quoting System
Now that you know what face amounts trigger a new rate band, you can visualize them in our rating system. Just remember that the discounts come it at 100,000, 250,000, 500,000 and $1,000,000.
Take advantage of our quoting system that will allow you to compare over 40 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.
Our Final Thoughts
You will have many questions you would like answered, so don’t be afraid to ask. You are welcome to call us seven days a week, from 9:am to 9:pm. If you decide to apply, we use a quick and straightforward telephone application to simplify and streamline the application process.
I hope this blog post on life insurance rate bands has answered many of your questions.
All the best,
Jack Venturi
Should you have any questions or need further assistance, please don’t hesitate to call us at 815-390-7545 for a prompt response.
