How Does Age Affect Life Insurance Rates?


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UPDATED: 2021-04-21T18:54:16.661Z
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Whether you’re fresh out of high school or a decade into retirement, you should have life insurance. However, a high school graduate and a retiree probably won’t qualify for the same rates.

But how does age affect life insurance rates? It’s one of a few risk factors that can determine how likely the insurance company will need to cover your death.

How Insurance Companies Factor In Age

Life insurance rates depend on many factors. The most significant factor is if you get a term life insurance policy or a permanent life insurance policy. Term life insurance is usually cheaper because it will end after a certain number of years. Your rate won’t change during the term.

After that, you will need to renew the policy, but you won’t qualify for the same insurance rate. However, you will get a new rate that will be in effect until that term ends.

On the other hand, permanent life insurance is in effect until you die. Because of that, you may have higher premiums. The insurance company will also most likely raise your premium each year because they don’t have a term to use to average the cost.

An insurance company may use actuarial tables to determine life expectancy and estimate mortality rates. Then, the company will set a rate so that they don’t lose money covering you or another person.

Risk and Life Insurance Premiums

Another factor insurance companies consider when determining your life insurance premium is your risk of using the coverage. Age is the biggest factor because your odds of needing to use the insurance increase as you get older.

However, other factors can determine your risk, like your gender. Depending on the policy, you may need to pay more as a man than a woman who is the same age and has the same risk factors.

If you have significant health problems, you may also need to pay more for life insurance. And as you age, your risk of certain health problems goes up, which can also affect your rates.

Someone who smokes may also have higher rates than non-smokers of the same age and gender. Your occupation can also increase your risk, primarily if you work in a hazardous field. The same is true if you have hobbies like sky-diving.

Insurance companies may also look at your family history. If your relatives have passed away younger than the average person, you may have higher rates, even when you’re young. While your age can affect your life insurance rates, the combination of your age and other factors is essential.

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Term Life Insurance Premiums and Age

If you get a term life insurance policy, you won’t notice an increase in your premium until the term ends. When you get term life insurance, the coverage will last for that specific term. That allows insurance companies to average out the cost of coverage.

For example, maybe the insurance rate at the start of your policy is $15, but at the end, it would be $25. Your insurance company may average it out to be $20 for each year of your plan with a term life insurance policy.

You will need to pay more for the first few years of your policy. However, you can keep from having a rate increase each year. That can be good if you don’t make a ton of money and don’t want to worry about rising costs.

Even though you won’t see it, your insurance company will still look at your age and other risk factors. They can determine how much to charge you each year, but they will give you the average rate. It doesn’t matter if your term is shorter or longer.

It's possible to outlive your term life insurance policy. Once the term ends, you can renew the policy. But since you’re older than you were when you had the previous policy, your new rate will most likely be higher.

Qualifying for Term Life Insurance

Your age can also affect if you qualify for a specific term life insurance policy. As you get older, you may not be eligible for as long a term, so you will need to renew it more frequently. Then, you will see a rise in your insurance premium more often.

You may also need to get more tests before you can get term life insurance when you’re older. The tests can check for other risk factors, like health problems. If those tests show you have a certain health condition, the insurance company may give you a higher rate.

However, if you start a term life insurance policy a year or two younger, you may be able to get out of certain tests. Then, your age and health may help you qualify for coverage and get a lower rate.

Reaching certain ages, like 45 or 70, may affect the tests you need before you can get life insurance. While you can eat a healthy diet and stay active, you can’t avoid every possible health issue. You may not always qualify for affordable coverage.

Permanent Life Insurance Premiums and Age

Permanent life insurance has a more straightforward answer to “how does age affect life insurance rates?” Whenever you have a birthday, your insurance company can raise your premium. They don’t have to wait until a term expires, and they can’t average your cost over multiple years.

Permanent life insurance may also be more expensive because it will cover you for life. You don’t have to renew the policy after 20 years. Even when you’re young, having a permanent life insurance policy can cost you more because the company will most likely need to cover your death.

As you get older, the same factors can raise your rates, such as your age and overall health. If you develop a health condition, that might affect your premiums. So can your family history and your smoking habits.

Buying a permanent life insurance policy before your birthday may not help much. You may not need a test now, but you may need specific tests as you get older. Regardless of tests, your company may still raise your rate after your birthday, so the savings probably won’t last for long. There are a number of no medical exam life insurance options you can check out.

Qualifying for Permanent Life Insurance

You can qualify for permanent life insurance at any age, unlike term life insurance, which may have strict requirements. Now, permanent life insurance policies may also need certain tests to estimate how long you will live.

However, you will still be able to keep the same policy until you die. Because of that, the company can charge higher premiums to make up for the cost of covering you. They know they’ll almost definitely need to pay.

Despite the higher cost, permanent life insurance may be better for older adults and other high-risk people. You don’t have to worry about your term ending and not having coverage. As you age, having that guarantee can be worth it so that you don’t forget to renew a policy.

How to Save on Life Insurance

Whether you’re in your 20s or 80s, you can do a few things to save on life insurance. The strategies you use can vary based on your age, but they can help you lower your premiums. Consider a few options if you want to save money on your life insurance.

Start With Term Life Insurance

When you’re young, term life insurance is the best option. You can get a longer-term policy, so you don’t lose coverage too soon, but you can get a lower premium than a permanent policy.

After the policy ends, you can renew it, though for a higher rate. Still, the cost can be lower than a permanent policy with similar coverage.

Buy Before Your Birthday

No matter your age, you should look for term life insurance before your birthday. Then, you can qualify for a lower rate because the term will start and end when you’re slightly younger.

You may also be able to avoid getting certain tests to qualify for coverage. For example, consider if insurance requires a test for people 45 and older. If you can start that policy when you’re 44, you won’t need to get that test to qualify. You can increase your chances of qualifying and getting a lower rate. You can also look into companies that don't require a medical exam.

Switch to Permanent Life Insurance

As you get older, you may want to switch to permanent life insurance. For one, it can be harder to get term life insurance because you may not qualify for longer terms. However, permanent life insurance can take away the stress of remembering to renew your policy.

If you have a family history of dementia or similar conditions, you may want to invest in permanent coverage. Then, you won’t have to worry about forgetting to renew your policy later.

Get Multiple Quotes

At any age, you should shop around for life insurance. You may be able to get a better rate or better coverage for the same rate. You can do research to find the best life insurance companies in your area to get quotes from.

Consider how much coverage you need and your budget for premiums. Then, you can get quotes to see which company is the best for you.

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