This case study compares the lowest life insurance premium rates for a male age 62 born on July 30, 1947. This is the same birth date shared by former body builder, actor and former governor of California, Arnold Schwarzenegger.
Using the online premium quote calculator at the Term4Sale website, rates were calculated for a policy in the amount of US$1 million dollars.
The purpose of this analysis is to identify the factors that can save the most premium dollars. Even a well-informed and well-heeled leader like Governor Schwarzenegger can save money by taking the time to carefully compare available life insurance options.
Lowest Smoker Life Insurance Rates by Term
Although Governor Schwarzenegger smokes cigars and not cigarettes, life insurance companies still underwrite him as a smoker. Presented below are the lowest annual and monthly premiums that male smokers age 62 are charged for $1 million in coverage. Also provided is the name of the life insurer with the least expensive rates guaranteed for 5, 10, 15, 20 or 25 years from the policy effective date.
- 5 Year Renewable: Minnesota Life … $14,360 annual ($1,256.50 monthly)
- 10 Year Renewable: Primerica Life … $11,735 annual ($1,114.83 monthly)
- 15 Year Renewable: Trustmark … $17,990 annual ($1,619.10 monthly)
- 20 Year Renewable: Massachusetts Mutual ... $22,020 annual ($1,915.74 monthly).
At first glance, 10-year renewable term insurance would appear to be the best deal. During the first 10 years, a male smoker the same age as the Governator would pay a total of $117,350 for a 10-year term contract. The 20-year renewable product costs $220,200 or 87.6% more during the initial 10 year term.
However, premium rates for a 10-year renewable policy skyrocket at the end of the 10-year rate guarantee period even for the healthiest people. The 20-year renewable premiums remain the same for another 10 years. This is why the 20-year renewable term policy is often the more economical choice over the long run.
Smokers Who Pay Annual Life Premiums Save
Another way to save money is for insured persons to pay their term life insurance premiums annually rather than monthly. This can lead to savings from 5% to 14%, depending on the administrative policies of the life insurance company underwriting the coverage.
A smoker age 62 who pays the $14,360 annual rate for a 5-year renewable term policy from Minnesota Life pays $718 or 5% less than the annualized charge of $15,078 calculated by multiplying the $1,256.50 monthly premium times 12.
A smoker age 62 who buys 10-year term life coverage from Primerica saves $1,642.96 per year by paying the annual $11,735 premium. The yearly rate is 14% less than the annualized monthly premium of $13,377.96 ($1,114.83 times 12).
Another person in the same age and smoker classification will save $1,439.20 or 8% per year by paying $17,990 in annual premiums to Trustmark Insurance rather than the annualized $19,429 based on the $19,429.20 monthly rate.
At $968.88 per annum, the savings for the 20-year term life coverage from Massachusetts Mutual are lower but not insignificant. Policyholders pay $22,020 in annual premiums, which is 4.4% less than the $22,988.88 in total monthly premium bills.
Lowest Non-Smoker Life Insurance Rates by Term
Non-smokers age 62 are rewarded with even greater savings simply because most non smokers live longer. Below are the annual and monthly premiums for non-smokers under term life insurance policies with 5, 10, 15, 20 and 25-year rate guarantees. The difference between the annual premiums for smokers and non-smokers is shown within brackets.
- 5 Year Renewable: Minnesota Life … $6,380 annual ($558.25 monthly) - $7,980 lower than for smokers
- 10 Year Renewable: Primerica Life … $5,685 annual ($540.03 monthly) - $6,050 lower than for smokers
- 15 Year Renewable: Ohio National Life … $8,145 annual ($724.91 monthly) - $9,845 lower than for smokers
- 20 Year Renewable: Massachusetts Mutual … $11,420 annual ($993.54 monthly) - $10,600 lower than for smokers
- 25 Year Renewable: Transamerica Life … $15,950 annual ($1,395.63 monthly) - 25-year term not available for smokers.
Non-smokers are able to buy a million-dollar 25-year renewable term policy from Transamerica at guaranteed rates much lower than the 15-year renewable policy from Trustmark Insurance. Because no 25-year term policies are available to smokers, insured will be forced to policies at severely high premium rates when their original rate guarantee periods end.
Savings for Consumers Buying Term Life Insurance
This analysis showed how male consumers the same age as Arnold Schwarzenegger can save about:
- $10,000 per year by choosing term life products with the appropriate rate guarantee periods;
- $1,642.96 per year by paying premiums annually rather than monthly; and
- $10,600 per year by being a non-smoker (which typically means no use of nicotine products for 3 to 5 years).
Annually, these savings amount to over $22,000. Projected over 20 years, this becomes roughly $450,000.
Given that the rates used in these calculations were the lowest possible premiums from the Term4Sale website, potential for long-term savings can easily exceed half a million dollars.
Potential term life insurance premium savings that high make a compelling case. In fact, they make for a financial presentation worthy of the attention of even the accomplished Mr. Arnold Schwarzenegger.
Daniel Workman - A senior business and finance writer who also does French translations, notably international trade and insurance materials.
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