Term Life Insurance Articles
Why Term Life Is Cheaper For Those Of A Younger Age
2010-11-29
When buying a life insurance policy, whether it's term life insurance or some form of whole life coverage, age is a major factor when figuring premium cost. The reason for this is simple. Life insurance companies determine the cost for any policy based on the amount of perceived risk to them, the underwriters. This is true for homeowner's, automobile, disability, medical and life insurance policies alike. Someone buying a term life insurance policy at a young age is considered to be a lower risk than an older person buying the exact same coverage.
Insurance underwriting procedures are based on statistics found on industry actuarial tables. These tables are arrived at by applying something called the law of large numbers. Here's a simple example. If the life expectancy of a man living in the United States is 75 years, someone 25 years of age is expected to live, on average, for another 50 years before he dies. Some will certainly die before they reach the age of 75, while some will live longer than that.
Since insurance is a way of spreading risk across a large number of people, insurance companies are able to mathematically determine how much to charge for a term life insurance policy by factoring in all of the different risk factors. Age is just one of these factors. The fact is, policyholders of a young age are statistically less likely to die than older policyholders.
Other factors that come into play when writing a life insurance policy include various aspects relating to the health of the proposed insured. Some companies will require a medical exam before writing coverage and most will also require information regarding family medical history. Things like blood pressure, cholesterol levels and alcohol and substance abuse history all can be factors.
Insurance companies may also increase premium amounts if the proposed policyholder is in the military or has what could be considered a hazardous or high-risk occupation. Even one's driving record may be factored in as well as whether the policy candidate has a history of traveling to foreign countries that are considered to be risky for foreigners to visit.
A term life insurance policy is written to cover a specific term. Typical terms include five years, 10 years, 15, 20, or even 30 years. A common policy, called level term life insurance, guarantees that the annual premium amount charged will be not rise for the full term of the policy. For someone of a young age who initially buys a policy with a relatively low premium amount, it may be advantageous to go for one of the longer terms, since the low premium amount will be locked in.
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When buying a life insurance policy, whether it's term life insurance or some form of whole life coverage, age is a major factor when figuring premium cost. The reason for this is simple. Life insurance companies determine the cost for any policy based on the amount of perceived risk to them, the underwriters. This is true for homeowner's, automobile, disability, medical and life insurance policies alike. Someone buying a term life insurance policy at a young age is considered to be a lower risk than an older person buying the exact same coverage.
Insurance underwriting procedures are based on statistics found on industry actuarial tables. These tables are arrived at by applying something called the law of large numbers. Here's a simple example. If the life expectancy of a man living in the United States is 75 years, someone 25 years of age is expected to live, on average, for another 50 years before he dies. Some will certainly die before they reach the age of 75, while some will live longer than that.
Since insurance is a way of spreading risk across a large number of people, insurance companies are able to mathematically determine how much to charge for a term life insurance policy by factoring in all of the different risk factors. Age is just one of these factors. The fact is, policyholders of a young age are statistically less likely to die than older policyholders.
Other factors that come into play when writing a life insurance policy include various aspects relating to the health of the proposed insured. Some companies will require a medical exam before writing coverage and most will also require information regarding family medical history. Things like blood pressure, cholesterol levels and alcohol and substance abuse history all can be factors.
Insurance companies may also increase premium amounts if the proposed policyholder is in the military or has what could be considered a hazardous or high-risk occupation. Even one's driving record may be factored in as well as whether the policy candidate has a history of traveling to foreign countries that are considered to be risky for foreigners to visit.
A term life insurance policy is written to cover a specific term. Typical terms include five years, 10 years, 15, 20, or even 30 years. A common policy, called level term life insurance, guarantees that the annual premium amount charged will be not rise for the full term of the policy. For someone of a young age who initially buys a policy with a relatively low premium amount, it may be advantageous to go for one of the longer terms, since the low premium amount will be locked in.
