Does the Cost of Life Insurance Go Up with Age?

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There are a lot of myths and misunderstandings when it comes to life insurance. For example, life insurance is not a replacement for health insurance or workers compensation and most policies do not pay out to the policyholder. One of the most common misunderstandings, however, is with the cost of life insurance.

In general, it is believed that life insurance premiums increase as you age. While this is mostly true, it also depends on the type of policy you have.

Whole Life Insurance Premiums and Age

A whole life insurance policy is designed to cover the policyholder as long as they live and pay compensation to beneficiaries after the policyholder passes away. Since this policy lasts for the policyholder’s life without need for renewal, you could see changes every few years in your life insurance policy. Premiums on life insurance are based primarily on the policyholder’s life expectancy, which goes down as the policyholder ages.

However, switching life insurance policies because your rates go up can actually backfire. You tend to pay lower rates when you are younger, so if you cancel your policy and try to purchase another one, you may end up paying more than you were with your original policy.

Term Life Insurance Premiums and Age

Term life insurance policies work differently than whole life insurance policies in many ways. First, a term life insurance policy does not last for the policyholder’s life but for a set length of time such as 10, 20 or 30 years. Since this type of policy only lasts for a certain length of time, some of these policies have a set premium that is agreed upon at purchase and does not change while the policy is active. This means that even if you reach the upper limits of the term for the policy, your insurance rates will not increase based on your age.

These term life insurance policies are known as level term life insurance.

Keep in mind that the same premium changes apply if you want to renew or change term life insurance policies as with whole life insurance policies. If your term life insurance policy ends and you decide to renew it, you will likely see a substantial rise in your premiums.

How are Life Insurance Premiums Calculated?

While age is a large factor, there are other things that may influence how much you pay for life insurance. Such factors include:

Medical History

Since life insurance concerns your life expectancy, insurers may look back at your medical history to help calculate your risk. Family or personal histories of medical issues such as diabetes, Alzheimer’s and certain cancers can raise your life insurance rates.

Gender

On average, men and women have different life expectancies, thus their life insurance mates may differ. Women typically live longer than men, so they may pay less on average than men for life insurance.

Lifestyle

Believe it or not, your lifestyle can also have an affect on your life insurance rates. Individuals that frequently participate in risky activities such as skydiving may pay more for life insurance, as their risk of death is higher. Activities such as smoking can also influence life insurance rates, especially for individuals who have medical conditions, a poor medical history or are declared overweight.

Occupation

What you do for work can also influence your life insurance policy for similar reasons as your lifestyle. If you have a risky occupation, such as a professional racer, you may pay more for life insurance due to the increased likelihood of a claim.

Keep in mind that every insurer is different and your policy, as well as its premiums and influences, can change depending on who you insure with and where you live.

When Should You Buy a Life Insurance Policy?

Although many don’t think about life insurance until they are older, this type of policy is more cost-effective and useful when you are younger. Individuals in their twenties and thirties may consider a life insurance policy as soon as they start accruing debt that could put a financial burden on their family if they suddenly passed, such as student loan debt and home mortgages.

If you are unsure about when or how to get a life insurance policy, be sure to speak with an insurance agent and your family to make the best decision. Life insurance is crucial for taking care of your family when you are no longer able to, so ask any questions you have and get the policy you and your family deserve.

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