Term Life Insurance Articles
The Effect Of Age On Long-Term Life Insurance Policy Premiums
2010-09-03
Two of the most important factors in setting the premiums of a term life policy are the age of the buyer and the length of the term. Term life insurance policy premiums are decided by the relative risk that the policy poses to the insurance company, and understanding the effects of age and a longer term length on a buyer's risks is a fundamental approach to selecting a term life insurance policy.
The term of a policy is usually set at 5, 10, 20, or 30 years, and the term sets important limits on the policy. If the policyholder dies within the term, then benefits are paid. Otherwise, the policy simply expires, and the insurance company keeps all of the premiums that the policy holder paid. The shorter the term is, the lower the risk for the insurance company will be. Long term policies are serious risks, as one might imagine, and 30-year policies cost the most. However, the difference between the cost per month of a 30-year policy and a 10 or 20-year policy may not be so great if the policyholder purchases the policy at a young age. For example, say a 20-year-old has a choice between a 20-year and a 30-year term life policy. When the policy term expires, the policyholder will either be 40 or 50 years old. While there's certainly a greater chance of the policyholder's death in a 30-year span than in a 20-year span, the premiums of either policy may be fairly similar, especially if the 20-year-old policy buyer is in good health and doesn't smoke or have a dangerous occupation.
On the other hand, a 50-year-old term life insurance buyer will see a massive difference between the premiums of a 20-year and a 30-year policy because the chances of living to age 80 are very different than the chances of living until age 70. It's therefore a good idea to buy a long term life policy at a younger age when possible, as this will result in lower premiums for larger amounts of coverage. It's also a good idea to look at other risk factors that might affect your policy premiums, particularly your health and habits.
Long term life insurance policies can be difficult to coordinate, especially for older buyers. However, understanding the relationship between age and term length can be helpful when controlling policy premiums and can help you to understand the coverage that you're paying for when you decide to buy a longer term life insurance policy.
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Two of the most important factors in setting the premiums of a term life policy are the age of the buyer and the length of the term. Term life insurance policy premiums are decided by the relative risk that the policy poses to the insurance company, and understanding the effects of age and a longer term length on a buyer's risks is a fundamental approach to selecting a term life insurance policy.
The term of a policy is usually set at 5, 10, 20, or 30 years, and the term sets important limits on the policy. If the policyholder dies within the term, then benefits are paid. Otherwise, the policy simply expires, and the insurance company keeps all of the premiums that the policy holder paid. The shorter the term is, the lower the risk for the insurance company will be. Long term policies are serious risks, as one might imagine, and 30-year policies cost the most. However, the difference between the cost per month of a 30-year policy and a 10 or 20-year policy may not be so great if the policyholder purchases the policy at a young age. For example, say a 20-year-old has a choice between a 20-year and a 30-year term life policy. When the policy term expires, the policyholder will either be 40 or 50 years old. While there's certainly a greater chance of the policyholder's death in a 30-year span than in a 20-year span, the premiums of either policy may be fairly similar, especially if the 20-year-old policy buyer is in good health and doesn't smoke or have a dangerous occupation.
On the other hand, a 50-year-old term life insurance buyer will see a massive difference between the premiums of a 20-year and a 30-year policy because the chances of living to age 80 are very different than the chances of living until age 70. It's therefore a good idea to buy a long term life policy at a younger age when possible, as this will result in lower premiums for larger amounts of coverage. It's also a good idea to look at other risk factors that might affect your policy premiums, particularly your health and habits.
Long term life insurance policies can be difficult to coordinate, especially for older buyers. However, understanding the relationship between age and term length can be helpful when controlling policy premiums and can help you to understand the coverage that you're paying for when you decide to buy a longer term life insurance policy.
