Life insurance provides financial protection for your loved ones. You can use it to supplement your retirement income, to leave money to your beneficiaries and to support your dependents financially in case of your death. Even if you’re young, healthy, and single, life insurance policies can benefit everyone.
Your age, which is like all types of insurance but especially life insurance, will have an impact on the price of your premium. The rule of thumb is that the more you age, the more expensive your policy for life insurance will be. The rate at which you pay for life insurance depends on many factors.
How are life insurance rates determined?
Your premium is calculated by life insurance companies using a variety of criteria. The most important ones are your age, overall health and gender. They also consider the type of policy that you purchase, as well as the coverage you select. These five factors can have a significant impact on your life insurance premium.
Age
Your age is the first thing that will determine your life insurance premium. The life insurance rates for young people are lower than those of older age. There are exceptions to this rule. A 30-year-old is likely to receive a lower premium than a 40 year-old. A 40-year old will pay less than someone 55 years or older.
As you age, life insurance rates will rise because of health problems or shorter lives. Insurance companies will expect an older person to file a claim sooner and may charge a higher premium in order to offset this risk.
Health
Another factor that influences the cost of life insurance is health. Pre-existing conditions such as diabetes, heart disease, or obesity can make it harder for people to live as long as those who are healthy. Insurance companies might charge higher rates to people who have health problems or a family history.
Insurance companies also use a rating system to assess your health risk. These categories are represented:
- Preferred PLUS: People who fall under the Preferred Plus category have excellent health and no family history of diseases or pre-existing conditions.
- Preferred – People in the Preferred category tend to be in good health but may have a family history that includes one or two diseases.
- Standard Plus This category refers to individuals who are generally healthy but may have slight weight issues or minor medical conditions.
- Standard: The Standard category includes people who have moderate to severe health problems and a family history of diseases. Smokers typically fall into the Standard category.
Gender
Your gender plays an important role in your life insurance premium, it may not surprise you. Life insurance is typically more expensive for men than it is for women. Statistics show that women live longer than men. The U.S. Census data shows that the average life expectancy of a female was 81.9 years, while for males it was 77.1.
Type of policy
The type of policy you choose will also affect the premium for life insurance. Term life insurance offers the most affordable coverage because it only covers a short period of time. The insurance company can keep your premiums if you don’t use your coverage within the agreed term. Permanent life insurance policies, on the other hand are more costly because they offer coverage for your entire life.
Guaranteed life insurance policies can result in the highest rates. In order to cover the extra risk of insuring elderly or sickly people, guaranteed life insurance policies don’t require a medical exam. Insurance companies charge very high premiums for this type of insurance. Guaranteed life insurance policies often have low policy limits, despite the high rates.
Limit on coverage
Your policy’s coverage limit is the last factor that will determine your premium for life insurance. Your insurance premium will rise if you have a higher coverage limit. Your insurance company will pay your beneficiaries a set amount when you die. The insurance company will adjust the price of your policy to mitigate this payout.
A $100,000 coverage limit will result in a lower premium than someone with $1,000,000 coverage. In the end, it will cost insurance companies less to pay $100,000 than to pay $1,000,000 so premiums will be lower.
Rates for life insurance based on age
It is important to take into account your age when shopping for life insurance. This will impact your premium. You might choose to have one type of life insurance and not another depending on your age. This will allow you to obtain a lower rate. Here’s a quick overview of the life insurance rates based on age:
Young adult life insurance
Young adults tend to be in their best health so they may only require a limited amount of coverage. A term life insurance policy will provide adequate coverage to meet their budget and needs. A 35-year old couple with a 5-year old child might look into a term policy that provides $100,000 coverage for a 15 year term. This will provide protection until the child reaches adulthood. Life insurance policies for young adults can be tailored to your financial situation and cover immediate financial worries such as funeral expenses, outstanding debts, or loans.
Insurance for middle-aged people
A permanent life insurance policy with lifetime protection is best for people aged 40-60. A whole life insurance policy that has cash value and a $1,000,000 death benefit is the best option for a married couple looking to supplement their income in retirement. Depending on the number of beneficiaries, the death benefit can be adjusted up/down.
Seniors can get life insurance
Many insurance companies won’t sell life insurance policies to anyone over 70. A guaranteed life insurance policy might be the best and only choice for people over 70 or with pre-existing medical conditions. This policy doesn’t require a medical exam and is available for nearly everyone. Most guaranteed life insurance policies have a death benefit cap of around $25,000.
As you age, life insurance rates tend to increase. Insurance companies consider other factors such as your health, gender, type of policy purchased, and amount of coverage required to determine your personal rate. It is a smart idea to determine what policy would be best for you, your budget, and your coverage requirements if you are considering purchasing life insurance.
