The Impact of Age on Term Life Insurance!
There is one common question about term insurance, which comes up in almost every individual’s head- What is the ideal age for buying term life insurance?
The boy next door, who is about 25 years old only, must have already bought a life insurance plan. You, on the other hand, would plan on buying a term life plan in your 40s. Factually, it is never too late to buy a life insurance plan and as such, there isn’t any wrong or right age for that.
However, your age may impact the term life insurance rates per se. These insurance policies offer protection to your loved ones from financial stress, so holding one is definitely a smart financial move for the future. When to get one is based on what keeps in line with your investment and financial requirements.
However, it can be useful for you to know the impact of your age on term insurance, specifically the term insurance premium you will have to bear under such a policy.
What exactly is Term Life Insurance Premium?
Generally, the thumb rule says that the ideal time for buying insurance is when you are young as the premium amount will be lower, keeping everything else constant. There is a simple logic here- there is a basic consideration that while you are young, you are healthier, less likely to catch diseases, which come along as you age.
Hence, the health-related risks are lower, and a lower insurance premium by extension. The insurance providers may need you to get a medical test done before issuing a plan in your name after a certain age. Therefore, younger years of your life play in your favour.
The lower your age, the lower would be the rates on your policy. During the later years of your life, you will be having comparatively more responsibilities, liabilities, and debts, meaning you will need more financial protection for safeguarding the future of your family.
It is recommended that you buy a term plan including a huge cover. And this would mean a higher insurance premium again. As they say- “the sooner, the better”. Well, this fits in the case of term insurance as well because is always wise to buy a term plan early in your professional career.
Many of you may believe that you do not need life insurance until the time you have a spouse, house, and family. However, as stated above, the best age to get a life insurance plan may be way earlier than that.
A life insurance policy is not about instant requirements, instead, it is about planning to protect the financial future of your loved ones. We have already said that enough that the ideal time for buying term insurance is while you are younger, but what is the reason behind such a statement? There is one main factor- age!
How in your Age Important?
Your age is the main determinant for your term policy rates because the older you are the higher is the risk of passing away. Simply put, for the same term plan, a 45 old man may end up paying more than an individual who is 30 years old, even though they are in equally good health.
On average, you can expect to pay more 8-10% for each year you age, and that number may rise to 9-12% more every year by the time you are in your 50s. Obviously, for various plans (including term plans), once you have secured your coverage, the rates will not change for the entire life of the plan.
They remain locked, no matter what the changes are in your age, lifestyle, or your health. This is the reason why buying a policy young is emphasized. The simple act of buying insurance early can save your funds in the long run.
Apart from the benefits in the financial area, age also plays a role in how smoothly and quickly the application procedure goes. The older applicants may be needed to opt for additional medical tests such as an EKG, and even cognitive testing for dementia in some cases.
These tests may need additional effort from the applicant and slow down the process of the application. There are also chances that as you grow older the number of health conditions that you have to report may increase. In most cases, mental and physical health conditions need a statement from your physician for primary care.
Will I get a Term Insurance in the Later Years of Life?
Generally, age is not a disqualifying factor when it comes to life insurance. Many providers will offer you insurance well in your 80s. However, no matter what kind of life insurance you are trying to buy- permanent or term, there are very high chances that your insurance rates may increase each year you wait.
The age factor can be considered to be a base on which a person can predict health generally. For example, a young individual may not have the same life objectives at that age as that of a person who is in the older years of life and has experienced the most of what this life has to offer.
However, with the number of road accidents and other unfortunate events increasing every year, is there actually a gap amongst the longevity status of the old and the young? With that in mind, there are measures for minimizing the financial consequences of death.
A term plan is the most suitable financial safety net for the dependents for relying on for monetary comfort in case of the untimely demise of the breadwinner of the family. Against the cost-effective insurance premiums, term plans offer a huge corpus. However, the benefits of life insurance diminish as you grow older, and hence, it is suggested that you invest in one at the earliest.
Here a list of benefits offered by a life insurance plan.
Easy to Invest in
The technological advancements and the personalization of a term plan have made it possible to obtain one within a click of the few buttons. You can personalize and buy term insurance online from without having to put the effort of vising the insurance provider in person.
The term insurance plans are designed to be economical as well as simple. The dependents get the sum assured after having to pay a small amount of money as a death claim after the demise of the policyholder. But if the policyholder happens to survive his policy, he will not receive any benefit.
Flexibility of Premium
The term insurance applicant can go for a monthly, quarterly, or half-yearly payment of premium. Some of the term plans offer limited pay or single pay options also so that they can be affordable for all kinds of investors.
Flexibility in Claims
In case you think that the sum assured on your policy may be misused as lump sum amount, you can go for a staggered claim pay-out instead where the dependents get monthly pay-offs and a partial lump-sum for keeping them for exhausting all the claim early on.
Although term plans do not include health issues, there are many add-ons or riders that cover them, which you can opt for. You can add value to your insurance coverage by getting these- disability rider, accidental death add-on, income benefit add-on, critical illness cover, waiver of the premium add-on, and more.
The main question that remains now is when you should buy term insurance. For answering that, let us look at the factors, which would impact the decision for various age groups.
- The 20s: When in his 20s, the individual just steps in his professional life. With a lower amount of debts and lesser family responsibilities, the premiums on the term insurance for such an individual are comparatively reasonable.
- The 30s: The individual, when in his 30s, will have a family and kids who add up his responsibilities and obligations. The insurance premium can be slightly higher at this age considering the added family responsibilities.
- The 40s: At this stage in his life, he may have long-term financial obligations such as car loans or home loans, which are to be paid off. But responsibilities and priorities keep changing according to his financial conditions. The coverage must be able to take care of the family expenses after his demise. The premiums are even more expensive in this case.
- The 50s: During this age in his life, the major concern is a peaceful retirement. His kids may be working; his family may not be financially dependent on him anymore. The best option at this time is buying an endowment policy that can help him in saving and giving out a lump sum amount upon maturity. The premiums on term insurance at this stage are really expensive depending on his health condition.
The cost involved in waiting to buy term insurance is even worse than not investing in one at all. Your medical conditions are likely to develop even more as you are growing older. Buying insurance well in time keeping the age factor in mind is your best bet.