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How Age Affects the Cost of life Insurance
Age is the primary factor that determines insurance costs. How can you get the best rates for your age? We have some tips for you.
The two main characteristics of a life insurance applicant that have the most significant impact on life insurance cost are your age and your health.
The cost of life insurance coverage is determined by the primary factor, age, using actuarial life tables. Actuarial tables assign a probability of death while the policy is in force. Therefore, based on the actuarial tables, the older the applicant is, the older the applicant is, the higher the risk of insuring, and life insurance rates go up accordingly.
How life insurance rates work
Life insurance rates are based on actuarial tables, which means that the carriers look at how long people like you have lived in the past, and use that data to predict how long you will live in the future. Age and health are the primary contributors to how you are rated by life insurance companies.
The younger you are, the lower your premium will be. This is because younger people are generally healthier and have a longer life expectancy. As you get older, your premium will increase because your risk of dying increases. Your health is also a very important factor in determining your life insurance rate. If you have a history of health problems or if you’re a smoker, you’ll pay more for life insurance than someone who is healthy and doesn’t smoke. This is because people with health problems or who smoke have a higher risk of dying prematurely. So, if you are a young and healthy non-smoker, you will be rated as a low-risk individual and will have lower life insurance rates than someone who is older and/or smokes cigarettes.
Consider term life insurance rather than whole life insurance. Term life insurance rates are typically much lower than whole life insurance rates, because with term life insurance, the carrier only has to pay out if you die during the term of the policy. With whole life insurance, the carrier has to pay out regardless of when you die.
Finally, keep in mind that life insurance rates can change over time. If your health changes or your lifestyle changes (for example, if you start smoking), your life insurance rates will most likely go up. Conversely, if you improve your health or stop smoking, your rates may go down.
Life insurance premiums are also affected by how much life insurance you are buying from the insurance company. Life insurance rates are also different based on the type of life insurance policy you buy. For example, term life insurance rates will have lower monthly premiums than permanent life insurance.
How insurance premiums rise with age
Life insurance premiums increase for every year you become older. This is because younger people are typically in better health and have a lower risk of death than older individuals. So the lower the risk, the lower the premium.
However, as you age, your health can begin to decline, which raises your risk of death. Insurance companies account for this by charging higher premiums to those who are older. Coverage for people in their 20s is relatively cheap because they’re considered to be low-risk. Rates start to go up when people hit their 30s because that’s when they’re considered to be in their prime years and are more likely to experience an unexpected death. Premiums continue to increase as policyholders age because the risk of death also goes up as we get older.
Term life insurance rates are determined when you buy your life insurance policy, so your rates are fixed until the end of the policy. On the other hand, whole life insurance policies change the rate throughout the term of the life insurance policy.
Other factors that affect your life insurance
In addition to age, life insurance cost is impacted by other factors such as:
- medical history
- smoking status
- family health history
- poor driving record
- high blood pressure.
When you apply for life insurance coverage, you will complete an application that includes a medical history questionnaire and, in many cases, a medical exam. Both will provide information about health conditions and other personal factors determining your health status and risk for rating purposes.
Once the insurance application is completed, it will be submitted to underwriting along with the medical exam results. Life insurance products are priced according to the life insurance company’s risk assessment determined when they underwrite the application.
Frequently asked questions
1. As you age, what happens to the cost of life insurance?
The cost of life insurance goes up every year you age. Life insurance carriers use standardized actuarial life expectancy tables to determine the cost of life insurance.
As you age, life insurers know that health issues are more likely to occur. Therefore, it is advantageous to maintain good health to get lower life insurance premiums.
To lower your life insurance costs at a later age is to purchase a policy with level premiums. This means that your premium will remain the same throughout the life of the policy, regardless of how old you are when the policy is in force. Another way to offset the increased cost of life insurance as you age is to purchase a policy with increasing benefits. This type of policy provides an increasing death benefit as you age, which can help keep pace with the rising cost of living. By strategically assessing your needs in the short and long term, you can get adequate coverage and pay premiums that are more affordable.
2. Is there life insurance where premiums do not increase with age?
Yes, suppose you buy a level-premium term life insurance policy. In that case, the life insurance premium at the time you purchase the policy will remain the same for the duration of the term.
3. Why does age matter in life insurance?
Age makes a difference in insurance because of the life expectancy factor. The older you become; life insurers determine there is an increased likelihood that they will have to pay out on the policy. That’s why you can expect to pay higher life insurance rates as you get older.
4. Does life insurance decrease with age?
When you buy a life insurance product, you will purchase a fixed amount of death coverage. The death benefit will not decrease throughout the term, especially in permanent life policies such as universal life and whole life insurance.
Certain term life insurance policies do have declining coverage. Decreasing term insurance, for example, does reduce the coverage amount with age.
5. At what age should you stop term life insurance?
When you should stop carrying life insurance depends on your specific situation. Whether you carry term life insurance or permanent life insurance will be based on your needs and your financial plans. Most people think that they no longer need life insurance once their policy expires, but that’s not always the case.
If you have young children or other dependents who rely on your income, it’s important to have coverage in place in case of your death. As your children grow up and become financially independent, though, you may no longer need (or be able to afford) such extensive coverage.
The same goes for your career. If you’re nearing retirement age and have ample savings set aside, you may not need life insurance anymore since your family will no longer be relying on your income. However, if you’re still working and don’t have as much saved up, it’s important to keep your coverage in place in case something happens to you.
The average life insurance cost does increase with every year of age, so you may want to start early and plan on keeping some form of coverage for the duration of your life.
6. Is life insurance worth it after 75?
Life insurance coverage is worth having at any age. When you purchase life insurance, you purchase more than just a death benefit. You are purchasing financial protection for a variety of needs or purposes. Some form of term life insurance coverage will always come in handy, even if just to pay final expenses at the end of life.
7. Can a 90-year-old get life insurance?
Yes, seniors up to the age of 90 can qualify for life insurance from various life insurance companies. How much life insurance premiums are will depend on the typical factors of age and health. At this age, you can expect to pay substantially higher premiums for the same coverage than you would pay at a younger age.
8. Does life insurance end at age 70?
Life insurance does not end at 70. Many life insurance companies still offer permanent life insurance and term life insurance at age 70 and beyond.
9. What is the oldest age at which you can buy life insurance?
Applicants up to the age of 90 can find a life insurance company to offer coverage. However, the death benefit amount may be limited, and the monthly premiums may be costly. Therefore, this is a time when you may consider getting multiple life insurance quotes and shop for the lowest life insurance cost.
The good news is that even at an advanced age, you can find permanent life insurance as well as term life insurance.
10. What happens to whole life insurance at age 100?
A whole life insurance policy matures when the insured turns 100. The life insurance company considers the life insurance policy paid up. At this point, the life insurance company may pay out the death benefit to the beneficiary and close out the policy.
Two things happen here: life insurance is terminated, and so is the ability to transfer the death benefit tax-free; this is now a taxable event.
It would be prudent to have a strategy to mitigate the taxable event that will take place with the life insurance policy ending and the death benefit paid out.
11. Can I be denied life insurance because of my age?
Yes, unfortunately, there comes a time when life expectancy becomes an issue for life insurance providers. After the age of 90, you will not be able to purchase life insurance in most cases.
Buying a life insurance policy is more affordable when you are young. Life insurance policies are rated based on factors that determine life insurance costs, which are different than the life insurance premiums you are quoted.
Permanent life insurance policies have two different components that make up the premium you are charged: the cost to insure and the cash value component. The older you are, the higher the life insurance cost becomes.
Term life insurance rates start to become more and more attractive if you are shopping for insurance after about 40 years of age. If you are in good health, that will help secure affordable life insurance rates in your older years.