Buy a term plan and secure your family
Before you move forward with making any commitment to any policy, it is important to understand how the premium charged to you on a policy is determined. And, here we raise the curtain on the biggest factor that comes into play... your age! Yes, you read that right! How old you are has a great say in what the premium charges for your policy will be.
Your age is generally the primary factor that largely influences your life insurance price, regardless of whether you are seeking a term insurance policy or a permanent life insurance policy. Generally, the premium charges increase roughly around 8-10% for every year of age, it can also go down to 5% if you are aged in your 40s, and can go up to 12% if you are aged above 50.
When you are in the market seeking to opt for term insurance, your life insurance price is established while buying the policy and remains constant for the rest of the tenure. However, with the whole life insurance, the life insurance price increases every year.
Age also has a role to play when it comes to the decision of a person qualifying for life insurance coverage at all, with the rising strictness in qualifying for the medical examinations.
Whether the policy you are considering to opt for is a term policy (a policy that offers you coverage for a fixed period of time), or a whole life insurance policy (a coverage policy that offers an accumulated cash value), or a universal policy (a flexible coverage plan that builds cash value while allowing you to adjust the allocation between the insurance and saving component of the policy), the premium charges adding up to the life insurance price are influenced by numerous factors about your life. Some of these factors are the quality of your health, or if you are or were a smoker, any family history of illnesses, any hazardous activities or hobbies you might be into, the number of international trips you take, your weight and height, whether or not you have a hazardous occupation, all these factors can also have an impact on the amount of premium that you are asked to pay.
On top of this, if you are considering opting for either a whole life insurance policy or a universal coverage policy, then the rate of return on your accumulated cash value will either increase or decrease the premium charges that you will have to pay. Experts have suggested that a higher rate of return on the policy’s accumulated cash value can go a long way in keeping your premium charges to a minimum. Some also say that opting for a rate of return that is lower than expected on your cash value will require you to pay up high funding amounts to keep the policy in motion longer.
The professional experts have said that in the end, the age of the applicant is the most vital factor contributing to both the term life insurance price and the whole life insurance price.
The annual premium or the life insurance price for a term coverage policy is fixed at the time the policy is purchased and remains constant for the entire duration of the policy. Generally, the premium amount for permanent life insurance policies is said to increase roughly by 8 to 10% for every year of age.
The reason behind this increase every year is easy math, every birthday of your pushes you one year closer to life expectancy, which thereby makes you more expensive to insure in the eyes of the policy provider.
What makes it possible for you to hold the term plans steady at one life insurance price instead of raising the premiums for every year of age, the insurer spreads the premium charged to you over a period of 10, 20, or 30 years and then these are averaged into one single payment. Instead of facing low premium charges when you are younger, and high charges when you are older, you end up paying the same amount every year.
Once the term of the policy that you are holding currently comes to an end, you could find yourself facing very steep premium charges depending on your age. If as an insurer you outlive the term of your current policy, your insurance provider must adjust the rate of premium on your policy to reflect your current age.
Whole life insurance price rises with your age, however, it is said by professionals of the industry that the premiums charged are determined by the provider of the policy every year based on the actuarial tables. The reason for the increase at every successive age is that there is a bigger drain on the accumulated cash value because of the rise in the mortality charges.
It is also said that age has a great say in whether the applicant will qualify for life coverage at all. Older ages can limit the options of the applicant. For instance, many of the term insurance providers offer policies with terms of 20 years only to those applicants that are aged between 18 to 70 years, after which they do not offer a term that long.
The other requirements also tend to increase as you mature. Every insurance provider carries out health examinations before issuing any policy to any applicant. The older you are, the more are such tests that are involved. Additional health examinations or tests can definitely have quite an impact on the life insurance price as they can detect more health issues.
The Bottom Line
For the sole reason that every year of your life can cause you to drain more and more funds on just the premium payments on your life insurance policy, it is a good idea to try and buy any policy that you might be thinking of opting for before your birthday arrives and another year gets added to your age. To ensure that you opt for the policy that is offered to you at the best life insurance price, make sure to obtain quotes from at least two to three life insurance providers.
If you are still in the searching phase, considering contacting an agent, or in today’s digital era make use of the online tools available such as a web aggregator that allows you to compare numerous providers and policies all in one place.
Once you have found the policy that favors your needs and requirements the best, be careful to buy only the amount of coverage that you require, buying more than what you require will only drive up the life insurance price and cause a burden on your income.