By Mark Vallet

Updated May 20, 2011

Whether you'll receive guaranteed life insurance rates is important if you're keeping a close eye on finances. If premiums increase, the policy could become unaffordable. But whether your rates will remain steady depends on the type of life insurance you purchase.

Guaranteed life insurance rates: term life

There are several types of term life insurance, and depending on the coverage you buy, your premiums may remain level or increase over time.

  1. Level term insurance: Level term policies guarantee that the death benefit will remain the same throughout the life of the policy. Typically, premiums remain the same as well. However, the New York Department of Insurance notes that premiums for some level term policies may be fixed for only a specified period or may eventually increase, so it's important to review contract details before committing to a policy.
  2. Renewable term: Usually sold in one to five year increments, these policies can be renewed when the term expires without providing proof of good health. Generally, premiums increase each time the policy is renewed.
  3. Decreasing term: Although rates remain level while the policy is in force, the death benefit decreases over time.
  4. Return of premium: All or a portion of premiums are returned to policyholders at the end of the term period if a death benefit is not paid out. Life insurance rates and death benefits remain the same, but return of premium policies are much more expensive than other types of term life insurance.

Whole life policies offer guaranteed life insurance rates

Many whole life policies have guaranteed life insurance rates - meaning premiums remain steady and won't increase over time. Whole life is meant to provide insurance protection for an entire lifetime. Other common features of a whole life policy include a guaranteed death benefit and a cash account that increases in value over time.

Not all whole life insurance policies have level premiums

While the majority of whole life policies offer level premiums, there are exceptions. With traditional whole life insurance you'd make periodic payments, such as monthly, semi-annually or annually, to keep the policy in-force. However, a limited payment whole life insurance policy allows you to pay premiums for a specific period of time and receive coverage for a lifetime--premiums are often significantly higher than those for traditional whole life. Alternatively, with a single premium whole life policy, you could make one very large payment, and receive lifetime coverage.

Indeterminate premium whole life policies are another exception. The original premium is based on an estimate of the insurance company's investment earnings, mortality rates and expenses. If these factors change, rates will increase. The majority of these policies have a stated maximum premium that can never be exceeded.

As you can tell, whether your policy will have guaranteed life insurance rates varies depending on the policy type. Make sure you find life insurance that best meets your needs, and fully understand the terms of a policy before you buy.