This advertising widget is powered by HomeInsurance.com, a licensed insurance producer (NPN: 8781838) and a corporate affiliate of Bankrate. HomeInsurance.com LLC services are only available in states where it is licensed and insurance coverage through HomeInsurance.com may not be available in all states. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions (such as approval for coverage, premiums, commissions and fees) and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way.
Life insurance rates by age
The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here's an explanation for . This content is powered by HomeInsurance.com (NPN: 8781838). For more information, please see our .
One of the key elements that impacts your life insurance premium is age. Like other forms of insurance, life insurance premiums are based on the risk of a claims payout. Life insurance is a type of coverage that is more likely to pay out as we get older. This inherent risk is typically reflected in life insurance premiums, especially when you apply for a new policy. Although there are other factors that influence your premium, such as your health, medical history and hobbies, age is a factor that could greatly impact your insurance quote, so you may benefit from buying a policy while you're younger.
How life insurance rates are determined
Life insurance companies use a few different criteria to calculate your premium. Some of the most significant ones include your age, overall health, gender, the type of life insurance policy you buy and the amount of coverage you choose. You may be able to build a more robust life insurance policy with riders. These add-ons may help you customize your policy and make your coverage more comprehensive, but they will also likely increase your premium. Below is a deeper look into some of these risk factors that insurance companies analyze and how they may impact your life insurance premium.
Young people tend to pay the lowest life insurance rates and older people pay the highest. Although there are exceptions — usually based on the health of the applicant — a 30-year-old will likely receive a lower premium quote than a 40-year-old. Life insurance rates usually increase as you get older because advanced age typically corresponds to health complications or just a shorter lifespan. This means insurance companies can expect a claim payout will come sooner for an older person and will often charge a higher premium to offset that risk.
Health is another major factor that contributes to the cost of life insurance. People who suffer from pre-existing health conditions — like diabetes, heart disease or obesity — may not live as long as healthy people with few or no medical conditions. As a result, insurance companies may charge higher rates for people with health issues or a family history of disease.
In most cases, in addition to a traditional medical exam or health questionnaire, insurance companies use a rating system to determine your health risks. Represented are the following categories:
- Preferred Plus: People in the Preferred Plus category are in excellent health, with no family history of disease or pre-existing conditions.
- Preferred: Those in the Preferred category are typically in great health, but they might have a family history of one or two illnesses.
- Standard Plus: The Standard Plus category means the individuals are mostly healthy, but may be slightly overweight, or suffer from minor conditions without a long family history of disease.
- Standard: People in the Standard category suffer from moderate health issues and have a strong family history of disease.
- Substandard: This category is for applications with moderate to severe health issues or risky health habits, like smoking.
Insurance companies may use different categories depending on their own regulations.
It may come as a surprise to learn that your gender also plays a key role in your life insurance premium. Men typically pay more for life insurance than women. This is because statistics show that women have a longer lifespan than men, meaning companies may pay out a life insurance benefit earlier for men than for women. According to data from the U.S. Census, the projected average life expectancy for a female in 2020 was 81.9 years old, and for men, the projected average was 77.1 years old.
Job and lifestyle
Your job and lifestyle are also factors that are considered by a company when determining your premium. If you have a fairly low-risk job and maintain your health, you may pay less for life insurance than a person who has what an insurance company might consider a high-risk job. High-risk jobs may include window cleaning, underwater welding and roofing.
Similarly, the hobbies you choose may also impact your life insurance rates. High-risk pastimes like skydiving, rock climbing, motorcycle racing and scuba diving may drive up your insurance premiums.
Life insurance premiums also reflect the kind of policy you buy. Term life insurance may be the most affordable policy type because it only offers coverage for a limited number of years. If you do not pass away during the term or convert or extend the policy, the policy expires without a death benefit being paid out. On the other hand, permanent life insurance policies are generally more expensive because they are intended to provide coverage for your entire lifetime.
If you purchase a guaranteed life insurance policy, you could end up paying the highest rate. Guaranteed life insurance policies do not require a medical exam, so to make up for the added risk of insuring older or health-compromised individuals, insurance companies usually charge expensive premiums in comparison to other forms of life insurance. Despite the high rates, guaranteed life insurance policies usually have very low policy limits, as they are generally designed to cover end-of-life expenses.
The last factor that determines your life insurance premium is your policy’s coverage limit. The more life insurance you need, the more expensive your insurance premium will usually be. When you pass away, your insurance company agrees to pay your beneficiaries a certain amount of money. Higher limits present a greater financial risk to the company, and that means a higher premium to compensate.
For example, someone who has a coverage limit of $100,000 will likely have a much lower premium than someone with $1,000,000 in coverage. Ultimately, it will cost the insurance company less money to pay out $100,000 than it would to pay out $1,000,000, so the average cost of premiums would be much lower.