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We've all seen and heard the ridiculously low-priced rates for term life insurance. They're not fake numbers but the reality is very few people actually qualify for the rates offered. The cost of life insurance is determined by two primary factors: Health and age, in that order.
Pre-screening Requirements
However, prior to a company considering insuring someone certain criteria needs to be met. There may be some variations and / or exceptions but most often the person: Must not be incarcerated; must not be in a hospital, especially on their death-bed; must not be on active duty in the military; must not be over age 85.
Evaluation Process
A person's health is thoroughly evaluated by one or more underwriters. The evaluation usually includes a complete medical history and medications, occupation, recreational habits (skydiving is not usually considered healthy recreation), use of tobacco, alcohol, and drugs, height and weight, and possibly more depending on which company is evaluating.
After that, a person's age is factored in relative to the health evaluation. The underwriters have a chart that an actuary has determined how long someone will live based on the results of the evaluation.
How Long?
Once a person's health and age have been evaluated and determined by an insurance company, the next factor that needs to be considered is how long the insurance will be for: 1 year, 5 years, 10 years, 15 years, 20 years, 25 years , 30 years, or permanently (the remainder of life no matter how long that is).
You Bet
It's important to understand the basic premise of insurance is it's a bet. The insurance company bets something probably WILL NOT happen. The insured bets that something WILL or could happen.
Insurance Companies Know How Many But Not Who
Insurance companies already know they will be wrong a certain number of times per 1000 people insured. The key to them being profitable is being able to be as accurate as possible in the number (s) they have predicted and / or planned for. The cost is based on that prediction.
Estimate is Not a Quote
Generally, the words quote and life insurance do not go together. When someone inquires about cost, the best anyone can do is estimate based on the information given. Until an insurance company reviews an application and makes an offer numbers, cost, and price are not definite.
The Offer is the Quote
The prices are set by the insurance companies. The way they operate is similar but different companies evaluate differently. Agents and brokers have no say in the cost of insurance do their best to match a particular person and situation with a particular company.
Once an offer is made
It's a quote and there usually is a 30-day free look to accept or not.
Consider
Less than 5% of all term life insurance policies have ever paid or will ever pay a death benefit. More than 80% of all permanent life insurance policies have paid or will pay a death benefit.