How Age Affects Term Insurance Premiums?

Today, when it comes to financially securing the future of your loved ones, term life insurance has become a standard. It enables policyholders to ensure that their beneficiaries (usually family members) get a lump sum payout to cater to their financial needs in case of the former’s unfortunate demise.
Most individuals tend to wait until they are a certain age to purchase their term life insurance policies so that they have adequate financial stability to pay the premium. However, this is a mistake that should be avoided, as term insurance premiums tend to rise with age.
Thus, if you are planning on buying a policy, understanding how does age affect life insurance premiums can help you make an informed decision.
Keep reading for a deeper insight!
Table of Contents
Why Do Term Insurance Premiums Increase as You Age?
Health Profile Decline
A health profile refers to a document that helps summarise an individual’s overall medical condition. As a person ages, their health stats usually tend to decline, making it riskier for the insurer to provide coverage. Hence, to cover this increasing risk, the policy provider increases the premium amount.Mortality Rate Influence
Mortality rate refers to the number of deaths occurring at a certain age within a defined population during a specific time period. Insurance companies generally use this rate as a standard to calculate the policy premiums. Thus, as your age increases, so does the mortality rate, resulting in a rise in the premium amount.Understanding the Concept of Mortality Premiums
What is Mortality Premium?
A mortality premium is a fee charged by the insurance company to provide coverage to the policyholder. It covers the financial risk borne by the insurer of the insured individual's premature death.
This fee is chargeable against the sum assured that is payable by the insurance company as a death benefit upon the holder’s death during the policy period.
Below is a table showing how the mortality rates rise with the increase in a person’s age:
How Mortality Premiums are Calculated?
An insurance company calculates mortality premiums in the following manner:
- It creates a mortality table by taking into account previous data about life expectancy.
- This helps the insurer’s actuaries estimate the insured individual’s human life expectancy by considering factors like health stats, existing diseases, and the development of medical science.
- In this regard, the mortality premium tends to rise with the increase in the policyholder’s age. However, the decided mortality premium amount remains the same throughout the policy period.
An Example of How Premiums Increase with Age
Let’s take a hypothetical example to show you how term insurance premiums tend to rise with age.
Suppose Mr Banik and Mr Das have both opted for a 25-year term life insurance policy with a coverage amount of ₹10.5 Lakhs. Also, both individuals are non-smokers and do not have any hereditary diseases in their family medical history.
However, Mr Banik started at the age of 20, while Mr Das started at 35.
Thus, over the years, their policy premium payments will be:
So, by starting early, Mr Banik paid ₹4,53,436.8 for the ₹10.5 Lakhs coverage, while Mr Das paid ₹7,55,726.4 for the same, just because he availed the policy at a later age.
Factors Beyond Age that Influence Term Insurance Premiums
Lifestyle Choices
Lifestyle choices like smoking and drinking highly increase the chances of death. Thus, if you are a smoker, you have to pay higher premiums compared to individuals who are non-smokers.Medical History
Having certain diseases like cancer, diabetes, heart ailments, etc., in your family medical history can make the insurer consider that you may be susceptible to them on a hereditary basis. In this case, you have to pay higher premiums.Risky Occupations
If you are engaged in risky occupations like working in mines, fisheries, oil fields, etc., it significantly increases your chances of death, resulting in higher insurance premiums.Riders and Add-ons
If you add riders and add-ons to your insurance policy, like Accidental Death Benefit Rider (ADB), Accidental Total & Permanent Disability Rider (ATPD), Child Support Benefit Rider (CSB), etc., you need to pay higher premiums to cover the cost of these benefits.Policy Tenure
Generally, the longer the policy tenure, the more is the premium amount and vice versa.Premium Payment Term
If you select a premium payment term shorter than the policy tenure, you will need to pay a higher premium. You must pay the premium for the entire policy period within your selected time frame.Eligibility Criteria for Buying Term Insurance Based on Age
The eligibility criteria to purchase a term insurance policy are as follows:
Age Limit | 18 to 65 years |
Citizenship | Indian |
Health Status | Applicants must be in good health. Pre-existing medical conditions like heart disease, asthma, cancer, etc., can raise premiums or even lead to the denial of coverage. |
Employment Status | The insurance company verifies the applicant’s employment status to assess their ability to pay the premium amount. |
Lifestyle Habits | Engaging in smoking, drinking, or other hazardous activities can lead to higher premium amounts or denial of insurance coverage. |
Medical Tests | For higher coverage amounts, insurance companies can ask the applicant to undergo medical tests in order to determine the associated risk. |
Disclaimer: The table above contains some of the basic eligibility criteria, and it may tend to differ across insurance providers.
FAQs about How Age Affects Term Insurance Premiums
Does the term insurance premium stay the same if I buy young?
Can older individuals still get term insurance?
How can lifestyle changes affect my term insurance premium as I age?
Does the term insurance premium amount change with time?
What is the age limit for availing of a term insurance policy?
What is the youngest age to opt for a term life insurance plan?
What is the best age to get a term life insurance policy?
Can a retired individual purchase term life insurance?
What is the maximum age for availing of a term insurance plan?
Can a senior citizen aged 65 years get term insurance?
Are there any specific age restrictions for different term insurance policies?
At what age does term life insurance coverage end?
What is the general age range for term insurance plans?
Do women have to pay more for life insurance premiums as they age?
How does age affect term insurance premium rates?
Do term insurance premiums generally increase with age?
How does age affect the cost of availing of term insurance?
What is the connection between age and term insurance premiums?
Are term insurance premiums usually calculated based on age?
What are the factors affecting term life insurance premiums?
Why is age such a crucial factor in term life insurance?
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Disclaimer
- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.
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