At some point in our lives, many if not most people consider life insurance as a means of protecting loved ones by providing a source of funds after we pass away. For some with limited means, this option may in fact be the primary way of investing in a financial legacy.

The good news is that life insurance typically covers most instances of death from illness, accident and natural causes with a financial payout to the policy’s beneficiaries.

But there are many questions that need to be answered in finding the right approach for each person’s situation and needs. Unfortunately, it’s been reported that less than 50% of Americans feel knowledgeable about life insurance. Moreover, many folks actually overestimate the potential by a significant margin.

Cost Factors

Here are some basic considerations that can have an impact on that cost:

Age. This is typically a top factor. It makes sense that the older you get, the more likely it is that the insurer will have to honor the payout on a policy. Age drives the initial cost of a policy as well as any increases in premiums over time.

Gender. It’s pretty simple. Since women in the U.S. tend to live longer than men, they generally pay less for life insurance.

Health History. Naturally, your health profile also plays an important part. Conditions to watch out for include heart disease, cancer, obesity, cholesterol, blood pressure and others. You’ll likely be required to take a medical exam and provide your records to a potential insurer. Your family’s health history is also important, especially any hereditary diseases.

Occupation. It’s a similar situation with your job. Premiums will probably be higher if you are in a profession involving toxic materials or dangerous duties.

Smoking. This habit is on the short list of risky behaviors for life insurance in terms of boosting premiums you’ll pay. If you’ve recently quit, or quit while you already have insurance, check with the insurer on the requirements for a potential rate reduction.

Driving. A record of incidents at the wheel can impact your life insurance cost as well as your auto insurance, so drive carefully.

Hobbies. Personal interests in general are a great thing. But high-risk activities will very likely have an impact on increased premiums. You may simply have to pay more if you want to continue skydiving or car racing.

Policy Options

The type of life insurance you choose will obviously depend on a mix of these indicators. You’ll need to become informed about these factors and how they affect premium levels so you can compare the many options that are available.

Two primary types of life insurance offer different approaches:

Term Insurance

This kind of coverage remains in place for a specific period of time, often from 10 to 30 years. Once that period is over, the policy will expire. Of course, that means you will need to start again when you’re at an older age.

Within this category are two types. One has monthly premiums that will not rise over time. With a “decreasing” policy, the death benefit for beneficiaries goes down over time. Other aspects of term life insurance policies may include renewals after the set term without requiring a medical exam. However, the cost will likely increase after the initial term.

Permanent or Whole Life Insurance

This kind of policy remains in force during your entire life as long as payments are kept up. With this type, there is a major additional component called “cash value” that builds up over time. You may be able to withdraw some of it or borrow against it, while the insurance remains in place.

As you might expect, this kind of insurance is usually more expensive since it isn’t limited to a set term and provides other kinds of advantages.

Employer-Sponsored

A word about employer-provided coverage. Life insurance may be available as part of your employee benefits package. However, the amount is likely to be limited, so you may want or need to augment it with a policy of your own.

Life (Insurance) Under Stress

We are all living in very stressful times. Understandably, these highly challenging conditions are pushing a rise in mental health issues such as anxiety and depression.

Mental health issues typically will be included as part of your overall health profile discovery process and should be disclosed to the insurer in terms of providing a truthful and accurate picture of your situation.

The good news is that a mild to moderate condition often may not result in higher premiums. However, if it has a negative impact on activities like work or school, premiums may be higher and very serious cases may preclude getting traditional coverage.

But don’t let these common conditions keep you from applying.

Conclusion

Consider your age and don’t wait until your health profile is compromised. Take a look at the demands and environment of your job. Decide whether the adrenalin rush of high-octane hobbies is worth a higher cost of insurance.

Last, but very important, is the decision on how much insurance to take out in terms of the death benefit for the beneficiaries you identify. This can be a somewhat complicated determination that takes into account potential lifetime earnings (for all parties concerned), existing and anticipated investments, obligations such as a house payment to cover, and more.

So do your homework. And find a reputable and professional insurance agent or broker who can help you navigate the choices and find the right solution. You can get a free quote comparison from KeenanDirect here.