Understanding How Age Affects the Premium Of Term Insurance
Updated On Aug 15, 2022
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There is no age limit to buying a life insurance policy. Some may adopt life insurance at 24, and others may purchase a life insurance policy at the age of 45. But it is never too late to buy life insurance, and there is no right or wrong age to adopt insurance plans. But it is a must to have one, as it protects the family and dependents from financial hardship.
How Does Age Affect Life Insurance Premiums?
Life insurance becomes expensive each year, and buying it sooner is always better. It is good to get life cover when one is still young, as the premiums will be low. When a person is young, they are healthy and are less susceptible to illnesses that come with advancing age. Thus, they have fewer health risks, and this reflects in a low premium.
The Premium amount of life insurance increases on an average of about 8% to 10% for every year of age. It could be as high as 12% annually if the insured is over 50 years of age. Age also influences if the person will qualify for life insurance coverage. They will be subjected to medical exams to qualify for insurance.
The insurance companies keep term life insurance prices steady rather than raising yearly premiums. The insurance company will spread the premium that the policyholder will pay over the years and average them into one payment. Instead of paying low premiums at a younger age and higher premiums as age advances, the taxpayers will pay the same premium every year.
At What Age Should You Get Life Insurance?
Life insurance premiums will be less expensive when a person is healthy and young. They will also be able to reduce their annual premiums by taking the life insurance cover at a younger age. The life insurance premium rates increase by 5% to 8% if the policyholder is in their 40s and by 9% to 12% if they are in their 50s.
Life insurance premiums will increase for a policy bought at an older age. Some insurers can also decline the coverage altogether at a certain point. For example, whole life policies can be issued to people who are as old as 80 or 85 years of age. Term policies, however, have restrictions and are not issued beyond 65 or 70 years of age.
Other Factors That Affect Life Insurance Premiums
Apart from the age of the policy seeker, other factors decide the amount of life cover premiums that one has to pay. These include,
- The lifestyle of the policy seeker. People with smoking and drinking habits may have to pay a higher premium.
- People with a known history of certain ailments such as cancers, higher BP, etc., may have to pay higher insurance premiums.
- Occupation also plays a role in calculating the premium amount. People working in mines, oil and gas industries, etc., have to pay a higher premium.
- Policy tenure, taking insurance for a long term decreases premium rates.
Bottom Line
Thus, the younger you are, you end up with a cheaper life insurance premium, as you have a low risk of mortality. At older ages, you will have more obligations, debts, and responsibilities to enjoy better financial protection and to secure the future of the family. Older people should also consider a term policy with a larger cover, though translates into higher insurance premiums.
Also Read:
Is Investment In Life Insurance Plans Better Than Investing In Mutual Funds?
