Life Insurance Rate Bands: Your Key to Saving Money in [2024] + YouTube Video
What are life insurance rate bands? It’s very likely that you’re 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 for 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
How Can I Use Rate Bands to Effectively Lower My Premiums?
One of the first decisions a life insurance applicant must make is how much life insurance they need to apply for. This refers to the face amount, otherwise known as the death benefit. The face amount is the number you must carefully choose so you are adequately insured.
Most of the time, consumers will just pull a number out of their heads with little or no thought. For example, I have found that many applicants will ask for a $200,000 face amount. In many cases this will be a logical number to select for their face amount, but is it the right choice?
They don’t realize that they just passed up receiving a considerable discount. If they had selected a $250,000 death benefit, they would be receiving a rate band discount allowing them to purchase an extra $50,000 in coverage for less money on top of that.
Essentially, the $250,000 policy will cost less than the $200,000 they initially requested. In many cases, the agent will go along with their choice and the applicant would be approved for their new $200,000 policy and never know what happened.
How to Secure the Lowest Term Life Insurance Rates in 2024: 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.
Concept of Life Insurance Rate Bands
Suppose you are shopping for life insurance and are interested in purchasing 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. As you read below, we will show you what happens at the next level of death benefits.
*Life insurance rate bands are also referred to as banded rate discounts.
What Types of Life Insurance Do Insurers Apply Rate Band Discounts To?
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.
1. Term Life Insurance
2. Whole Life Insurance
3. Return 0f Premium Life Insurance
4. No-Medical-Exam Life Insurance
5. Universal Life Insurance
6. Final Expense Life Insurance
Examples of Using Rate Bands to Reduce Premiums
The very first rate discount begins at $100,000 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 term 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 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 must 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. We use quick and straightforward telephone applications to simplify and streamline the application process when you decide to apply.
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.
