Life Insurance Rates by Age

Written by The Life Insurance Blog

Life Insurance premiums are based on two major factors: your age and health.

All other factors being equal, the younger you are, the cheaper your life insurance policy will be. Don’t worry, if you don’t consider yourself “young” it’s still possible to get cheap life insurance.

Therefore, if you don’t already have life insurance, the most affordable time to buy it is right now!

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How Does Age Affect Life Insurance?

Every day you age, you’re drawing closer and closer to higher premiums. Ironically, the youngest adults seem to think they don’t need it until far down the road, while older buyers wish they would have locked in their rates a long time ago. Here are the brackets:

Insurance Age: What Is It?

If you are going to shop for life insurance, you should know what your insurance age is to make sure you are comparing apples to apples.

For example, if you are currently 60 years old, but you turn 61 next week, you may be thinking you have one week left until your rates go up. Unfortunately, there’s a good chance you are too late.

Your insurance age, when discussing life insurance, is typically whichever age you are closest to! So if you are 61 years and 6 months old, you’re actually now closer to your 62nd birthday, so the insurance company is going to view you as 62. (Not all companies do this, but most.) While a year may not seem like it should make that much of a difference, the truth is that 71 year old looking for life insurance will likely be charged a different premium than a 72 year old.

This is because the law of large numbers that insurance companies use to draft their premium tables involves grouping each person into a single age group. For their statistics to be most accurate, they have to categorize you into the age you are closest to.

The Younger You Are, The Better Your Rate

As we mentioned, your life insurance is largely based on your age when calculating your cost to own the policy.

Term life insurance is especially age-sensitive when determining rates. This is because it is covering you over a very specific time period; the closer your life insurance period expires to your life expectancy, the more it will cost you.

  • If you’re a young adult, the increase in premiums is small each year.
  • If you’re middle aged, the increase in premiums starts moving faster.
  • If you are a senior citizen, expect your rates to go up very fast every year you age.

Because your natural life expectancy is so far away, you are considered lower risk when you’re young. As you near it, you are considered a greater risk to the insurance company of having to pay a claim. As your risk goes up, guess what else does? Premiums.

How Much Coverage Do You Need?

Your life insurance coverage amount is determined by several factors and is somewhat tied to your age as well.

The idea behind life insurance is to replace income after you pass, or to pay off any debts your family might incur or already have to deal with.

If you are 25 years of age, and expecting to work until you are 65 years old, your family would miss out on 40 years of your income if you passed away now. If you are 45 and you expect to work until 65, your family would miss out on 20 years of income.

Your human capital, or the value of your future work, is highest when you are young. If you are young and the sole breadwinner in your family, you may need a $1 million policy. As you age, and your remaining work years diminish, the idea is while your human capital is declining, your assets should be increasing. Eventually, the hope is to retire, and your income is coming solely from the assets you’ve accumulated, and not from you going to work.

What does this mean for your life insurance coverage amount?

If you are young, and you expect to be working a few decades, you may want to stock up on your life insurance now, especially since the premiums are going to be so low. If you are already in your 40’s and 50’s, you may need less of a face amount because:

  1. Your human capital is declining, lowering your replacement cost
  2. Your debts should be declining, dropping your coverage needs
  3. Your premiums are increasing with your age, making life insurance less affordable

Because everyone is different these rules don’t apply to everyone. You might be getting close to retirement age, but you still need a lot of life insurance. Just because you’re an older applicant doesn’t mean you need to skimp on your life insurance coverage.

Regardless of how old you are; you should take the time to calculate your life insurance needs before you buy a plan. Add up all of the bills your family would be left with and how much money it would take to replace your income. Your passing would not only leave them with emotional pain, but it would give them a lot of financial struggles as well.

Other Costs Associated With Life Insurance As You Get Older

There are other costs involved with owning a life insurance policy as you age. One of those things are called riders.

Let’s take the Waiver of Premium rider, for example, which is one of the most common riders to attach to a life insurance policy.

The waiver of premium rider is something you can attach to your policy for a small fee which protects your policy should you become disabled. If you are disabled for 6 months or longer, the rider will kick in and start to pay your premiums for you. In this way, even if you lose your income because you’re not able to work, you’ll still have a life insurance policy which won’t lapse.

Your age, however, also determines the cost of the waiver of premium rider. If you are a young 25 year old, your body is expected to last much longer without any disabling injuries, whereas a 55 year old is much more likely to incur a disability.

Getting Lower Rates: Buy While You’re Young & Healthy

If you’re an older applicant, you might be getting concerned about how much you will pay for your life insurance. Sure, your age impacts your rates, but it’s not the only factor the insurance company is going to review. They are going to look at dozens of other factors when adding up the costs of the protection.

Another major factor they are going to look at is your health. If you have any pre-existing health problems, you’re going to be looking at much higher premiums every month. This means, regardless of how old you are, it’s a good idea to focus on your health before you apply for a life insurance policy. The older you are, the more likely you are to have health problems, follow your doctor’s orders, stick to a healthy diet, and get some exercise.

The best way to get lower insurance premiums is to find a company with favorable underwriting for your age group. Some insurance companies are more favorable towards older applicants while other companies excel in giving life insurance to younger ones. It’s all about finding the perfect company to fit your situation.

There are thousands of companies you can choose from. Deciding between those companies could take you weeks, or you can use one of our independent agents. We aren’t your standard agents. We are not tied to one specific company. In fact, we represent dozens of highly rated companies.

We can help connect you with the best company for your age group. Finding the best company can be frustrating, especially if you’re older. Let us take the frustration away and help you get affordable life insurance protection.

If you’re wondering how much life insurance you should get or how much a policy at your age is going to cost, go ahead and give us a call. We have years of experience working with applicants of all age and we can give your family the coverage they need.

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