How Does Age Affect Life Insurance Rates?

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Article Contents
Picture of By <span>Matthew Roberts</span>
By Matthew Roberts

Updated on June 18, 2024

Visit author page
Picture of By <span>Matthew Roberts</span>
By Matthew Roberts

Updated June 18, 2024

Visit author page

4 minute read

Article Contents

Age is one of the foremost factors that impact life insurance rates, but it is only one piece of the entire puzzle. Your health, lifestyle, job, and even gender can all affect your life insurance rates, and it’s absolutely essential that you understand how everything plays together when committing to an insurance plan.

Age and Life Insurance Summary

  • Age is one of the biggest factors impacting life insurance rates, with older folks needing to pay significantly more than younger applicants.
  • Premiums are based on a person’s projected life expectancy, steadily increasing with age. 
  • That said, other factors also influence the total premium amount.

Let’s dive in further to learn about life insurance, age, and how everything comes together.

Life Insurance Rates Explained

By definition, life insurance is meant to provide your beneficiaries with a payout called a death benefit in the event that you pass away. This is in exchange for a life insurance premium, which really is just a fancy way of saying a monthly, quarterly, bi-yearly, or yearly payment made toward your insurers to maintain that coverage. 

That said, this is the most basic form of life insurance and there are many different types to suit most situations. Some policies have a “living benefit” that allows beneficiaries to withdraw from the payout while the insured individual is still living, for example.

Regardless of type, insurance rates are determined by actuarial tables. Within these tables are the relevant information about life expectancy and mortality rates based on age – making it the main factor for determining how much a person will pay on their premiums. 

Factors Affecting Life Insurance Premiums

How Age Impacts Your Insurance Premium

It’s not a secret that younger folks tend to pay lower premiums on their life insurance – and the reasoning is plain as day. Younger individuals in their twenties and early thirties are usually in the physical primes of their lives without having to do too much to maintain a basic level of good health, and that means insurance companies have less to worry about when it’s time to make claims on the policy.

In short, younger people are less likely to have life-threatening conditions or develop new ones that complicate their quality of life, and therefore they’re less of a risk to insurance companies. As a result, they’ll need to pay less to offset the potential risk of insuring them. 

Health Concerns

In some cases, younger applicants might not be required to go through a long list of health exams, which can mean better coverage down the line. Older folks, on the other hand, may be asked to undergo hyper-specific tests informed by the general issues associated with advanced age – which may impact the amount of coverage they get. 

Life Expectancy

Some types of insurance policies may increase your premiums over time. This can be as little as a 5% annual increase for folks under 40, but can quickly balloon to over 10% per year once you hit your 50s. The same logic applies to folks purchasing the insurance for the first time. For example, a 31-year-old individual buying an insurance plan at 36 is probably going to pay less monthly than they would have if they purchased at 37 or 38.

The logic is simple: for every year that passes, a person gets closer to their “life expectancy”, which means they become more of a financial risk for the insurers. As a result, they’ll need to pay more. 

All of this said, you should note that these are just general figures and the increases are often evaluated on a case-to-case basis. 

Other Factors That Influence Life Insurance Rates

As we mentioned earlier, age isn’t the end-all-be-all when it comes to determining insurance rates, and there are loads of factors that influence your monthly payments. Let’s dive in. 

There are many different kinds of life insurance policies, each with its own set of specific terms and conditions. Naturally, this also means monthly payments are evaluated in various ways – with some policies maintaining the same premium amount while others change over time. 

Term Life Insurance

As the name suggests, term life insurance provides coverage for a specific term, meaning it expires once the period is over – though there are options for converting it to permanent coverage. Generally speaking, these policies usually come in terms of 10, 15, or 20 years. 

Because these policies don’t have a savings component (meaning they have no real value outside the death benefit) and expire after a specific period, they’re the cheapest policies to maintain despite advanced age. What might cost you thousands of dollars a month in permanent life insurance might only set you back hundreds in term insurance. 

Permanent Life Insurance

Permanent life insurance is an umbrella term for any policy that covers a person’s entire lifespan versus just a few decades. Because of this, insurers usually combine life insurance with a savings component or trust that beneficiaries and primary policyholders may withdraw against, if needed. However, all withdrawals are usually made from the death benefit, so there is a bit of cost-to-benefit weighing necessary.

Furthermore, permanent life insurance plans cost much more on a monthly basis, which can be risky for some policyholders since they have to pay the costs for the rest of their lives. 

Beyond age, a person’s general health is naturally one of the main determining factors of your premiums. If you have a history of chronic illness or your immediate family members suffer from relevant health conditions, you may be flagged as more expensive to insure, and this will be reflected in your premiums. 

To understand this a little bit better, policyholders are usually categorized as Preferred Plus, Preferred, Standard Plus, Standard, or Substandard, with folks in better health receiving better appraisals. 

However, some group insurance policies don’t require a medical exam which can be beneficial to certain kinds of applicants. These types of plans are usually included in compensation packages for employees. 

Some jobs and hobbies are riskier than others – and insurers pay close attention when determining your monthly bills. For example, if you and your sibling were on completely even footing health and age-wise but you liked sitting at home crocheting while they liked skydiving, naturally the skydiving sibling would be charged more. 

This logic also applies to jobs, where professions that keep you indoors at the office would be less risky than deep sea mining or construction. 

Although it may seem like a non-issue to the regular person, insurers are hyper-cognizant of a potential policyholder’s gender when determining their premiums. On average, men tend to pay more than women on monthly premiums because women are more likely to live longer lives.

A policy’s coverage amount refers to the value of the death benefit that’s paid out at the end of the policy. Different policyholders can ask for larger or smaller coverage amounts, depending on what their family or beneficiaries require for their quality of life to be maintained. 

However, larger policy amounts naturally mean heftier premiums, so be sure to keep that in mind.

 Key Advice From MyChoice

  • Younger is better when purchasing life insurance, so shop around now rather than later.
  • Consider the type of insurance plan you’ll need for your beneficiaries. Term life is good for a while, but permanent insurance may be more aligned with your values.
  • Be smart with your financial decisions and shop around and compare before committing to any one insurer. 
Tips for Managing Life Insurance Costs as You Age

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