At a Glance:
The cost of life insurance is dependent on the individual applicant’s risk factors, one of which is age. There are several pros and cons to purchasing a policy, regardless of what age you are. Understanding those pros and cons is critical to getting the best product for your situation.
There are many kinds of life insurance, and each product is geared to a specific demographic or type of policyholder. Getting approved for a policy, however, is dependent on a list of factors that the life insurance company uses to determine your personal level of risk to them. In short, since life insurance pays out a death benefit to your beneficiaries in the event of your death, the insurance company wants to know what the likelihood is of you dying while you are insured.
To determine that probability, the insurance company looks at everything from your health condition to your employment and lifestyle choices. Each variable has a numerical figure representing risk attached to it, and the company will add all of those together to determine your specific risk.
Life Insurance Rates by Age
Most insurance companies don’t like to publish their exact cost ranges because life insurance policies differ so much for each policyholder. Instead, they prefer to speak directly to the customer, only offering a quote after assessing some of the risks the company may incur by insuring them. Not only does it allow them to actually interface with the client, but it also keeps prospective clients from misunderstanding what their potential rate and insurance coverage could be and looking elsewhere before even talking to an agent.
A few companies, however, do publish a generalized range of life insurance quotes. It’s important to understand that this is in no way a definite price; your own policy cost would be determined by your individual risk during the underwriting process. The rates listed below are merely representative of a sample policy rate.
JRC Insurance Group, one major insurer, publishes the following ranges for a 10-year term life insurance policy of $250,000 on a male policyholder:
- Age 20-29: $9.63 per month
- Age 30-39: $9.63 to $11.25 per month
- Age 40-49: $11.70 to $22.15 per month
- Age 50-59: $23.80 to $54.40 per month
- Age 60-69: $60.10 to $158.21 per month
- Age 70-79: $172.48 to $671.15 per month
- Age 80: $748.35 per month
Compare this with the prices for a female policyholder:
- Age 20-29: $8.80 per month
- Age 30-39: $8.80 to $10.45 per month
- Age 40-49: $10.88 to $19.18 per month
- Age 50-59: $20.45 to $38.93 per month
- Age 60-69: $42.15 to $98.88 per month
- Age 70-79: $108.25 to $453.39 per month
- Age 80: $529.94 per month
These rates—and the more individualized rates that are offered to specific policyholders after application—are determined in the underwriting process, based upon the specific risk factors of that applicant. It is also important to note that the best life insurance policies won't always have the cheapest prices.
During the underwriting process, many factors are taken into consideration besides age. Some of the other factors include but are not limited to:
- Gender – Males typically pay more than females due to statistically shorter life expectancy.
- Family medical history – Applicants with a family history of high blood pressure, heart disease, cancer, and other high-mortality issues may be at higher risk for developing them as well.
- Personal medical history – Pre-existing medical conditions, such as past illnesses or injuries, may increase risk. Those in excellent health can expect to pay less than those in poor health.
- Smoking status – An applicant is considered a smoker if they have used any tobacco product, to include pipes, cigarettes, cigars, or smokeless tobacco, in the last 12 months. Non-smokers will typically pay much less than smokers.
- Employment – If someone has a profession with a high rate of danger or injury leading to death, that is considered an additional risk factor.
- Hazardous hobbies – Applicants engaged in dangerous pursuits such as skydiving, hang-gliding, scuba diving, and other such activities are subject to extra risk.
- Alcohol use – Applicants are often asked about their level of alcohol use, as well as illicit or prescription medication.
How Does Age Impact the Cost of a Life Insurance Policy?
Typically, younger policyholders pay less in life insurance premiums than older clients due to fewer health problems, pre-existing conditions, and other risk factors. While older policyholders usually pay more, there are certain types of policies and insurers that are geared toward more senior policyholders to make their coverage more affordable, especially to those who may be on a fixed income such as Social Security.
Part of what affects the cost of a life insurance policy is the type of insurance it is. A term life policy, for instance, insures the policyholder for a specified amount of time, usually between a 10-year and 30-year term. The premiums are fixed for that time. At the end of the term length, the policy may be renewed at the rate for the insured’s new age and current risk factors, or it may be allowed to expire. Term life insurance rates are almost always cheaper than permanent life insurance rates.
A whole life insurance policy (sometimes called permanent life insurance), is not term-based. Instead, it insures the policyholder for the entirety of their life. The rates, while still fixed, are more expensive than a term policy. Whole life usually requires at least blood work and additional tests, if not a full medical exam. Once a person is insured under a whole life policy, that policy does not expire.
Your age matters far more in a whole life policy scenario than a term life one. When a younger client purchases a whole life policy, they generally have many years of monthly premiums built up before a death claim is made. With an older policyholder seeking a whole life policy, that time is lessened, resulting in more risk for the company based on the amount of time the policyholder can be expected to pay premiums before a death claim can be expected.
Age can also affect available riders on the policy. Riders are add-ons that can be purchased to “ride” on top of the policy. Some life insurance policies, for instance, have dismemberment or permanent disability riders that allow policyholders to make a partial claim on their benefits in the case of an accident, illness, or injury that results in the loss of a limb or other permanent disability. Other riders cover specific situations not normally covered on the boilerplate policy or offer additional benefits for a specific situation such as a death caused by cancer.
Riders come with additional costs to the policyholder, and in the case of an older applicant, some riders may not be available (such as a cancer rider to a senior applicant who smokes and has a family history of cancer).
Pros & Cons of Purchasing a Life Insurance Policy When You're Young
Regardless of whether you choose a term life insurance policy or a whole life/universal life insurance policy, it can be a good idea to purchase your first policy while you’re young. Not only will you lock in better rates, you can get a higher level of life insurance coverage for that rate. If you purchase a whole life policy, you’ll be covered regardless of whether you develop a new medical issue, even if it’s life-threatening or fatal.
Having life insurance, especially when you’re young, is important because you generally have higher debt levels at that point in your life, such as student loans or a mortgage payment. Later on, when you’ve had a chance to build retirement funds, pay off those educational loans, and maybe even pay off your house, life insurance is not as critical.
There is, however, still a drawback to certain types of life insurance. If you don’t have a family or dependents, life insurance may also not be necessary yet. As an investment, whole life insurance is not the best option for a high rate of return. In fact, you can make far more over time by using a different investment vehicle.
How to Find Life Insurance Rates for Your Age
There’s no way to know exactly what your personal life insurance rate will be unless you request a quote from an insurance agent. Most companies have a preliminary questionnaire that can help them offer you a general figure. Your final life insurance cost, however, will be determined in the underwriting process. It’s important that you talk to several companies and get a number of quotes before deciding to purchase a policy.
What your life insurance policy will cost you each month depends on a long list of factors that are specific to you as the applicant. Before signing on the dotted line, ensure that you have looked at the pros and cons of the policy you want and understand your coverage amount, any applicable riders, and what your benefits are.