Does Your Life Insurance Policy Premium Increase with Your Age?

Getting a life insurance policy at a young age is a good idea because rates are lower. It's generally true that the older you get, the higher your monthly life insurance premium will be. The reason is that people in their senior years have higher risks of death. Here's what you need to know about how life insurance premiums are affected by age.

How Life Insurance Rates Work

Your life insurance policy, whether it's term life or a whole life plan, pays benefits to people you name as beneficiaries after your death. This coverage comes from the money you pay into the plan. A whole life policy provides much wider and more flexible benefits, which is why it costs more than a term life plan.

Factors beyond age and current health condition that affect life insurance rates include gender, policy type, and coverage limits. Many young people start off with a term life plan due to lower costs. A typical term life plan is $500,000 coverage for 20 years. Higher coverage limits equate to greater risks, which pushes premium rates higher as well.

How Life Insurance Rates Are Determined

Life insurance premiums are determined differently by different providers. But age is a common risk factor to insurers, which is why rates for whole-life plans increase up to 10 percent each year after a person turns 50. Term life plans, by contrast, have set rates for a certain number of years, such as 20-year terms.

Risk Class and Life Insurance Premiums

Life insurance companies categorize people into risk classes based on their age, gender, and lifestyle. Certain age groups pose certain risks; young people are more adventurous, while older people experience more serious health issues. That's why seniors are often expected to take medical exams when signing up for a life or health insurance policy.

Smoking status is another definitive risk class that poses higher risks to the insurer. Other types of risk classes are shaped by family history, profession, and hobbies.

How Insurance Premiums Rise with Age

From an insurance company perspective, the older a person gets, the more expensive they are to insure. Many people choose term life insurance due to lower set rates. But once the policy expires, rates may be much higher due to inflation. A big advantage to a whole-life plan is that even though premiums rise with age, you'll have a growing cash account to make withdrawals if you choose.

At What Age Should You Get Life Insurance?

Life insurance costs the least in your youth. If you start a family, it's a good idea to plan for your family's financial future. Getting a whole life plan at a young age will help you build a financial safety net for you and your loved ones over many years. A whole life plan, unlike a term life plan, is like a growing cash investment you can tap into at any time for emergencies or any other reasons.

As You Get Older, What Happens to the Cost of Life Insurance?

The cost of life insurance premiums escalates as you age. If you don't have term life coverage in place by the time you are 65, it's likely your application will be declined by various insurers. But if you choose whole life insurance, a subset of permanent life insurance, you can sign up for a policy as late as 85.

Get the Best Life Insurance for Your Family with Amity Insurance Group Today

Getting a life insurance policy is a major life decision. Don't let it haunt you, as it can empower you to do what's best financially for your family. Contact us at Amity Insurance Group for more information on securing the right life insurance for your family needs.