Thinking of purchasing new life insurance? Before you make a commitment, it’s important to understand how the annual premium for a policy is determined. There are various factors that can inf🦄luence which insurance risk class you're assigned to.

Aside from health, your age is something life insurance companies take into consideration. The older you are when you purchase a policy, the more expensive the premiums will be. This is because the cost of life insurance is based on 澳洲幸运5官方开奖结果体彩网:actuarial life tables that assign a likelihood of dying while the policy is in-force—and unfortunately, the older you are the sooner that day is likely to come. Read on to see more clearly how age impacts the cost of life iꦡnsurance and♎ why it may be more cost-effective to buy a policy when you are younger.

How Life Insurance Rates Work

Life insurance is designed to pay out a death benefit to the person or persons you name as beneficiaries when you pass away. In exchange for this coverage, you pay a premium to the life insurance company. In the case of 澳洲幸运5官方开奖结果体彩网:term life insurance, you'd pay these premiums for a set term prescribed by the policy. With 澳洲幸运5官方开奖结果体彩网:permanent life insurance ♒coverage, premiums are due as long as the policy remains 𝓡in effect.

Companies that sell life insurance can use 澳洲幸运5官方开奖结果体彩网:actuarial tables to help set life insurance rates. Actuarial tables are used to estimate life expectancy and mortality rates. These tables, along with other factors, can determine how much you'll pay for life insuranceღ coverage.

Risk Class and Life Insurance Premiums

When calculating how much you'll pay for life insurance, your risk class comes into play. Life insurance companies assign appᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚlicants to various risk class༒es, based on factors such as:

• Age
• Gender
• Overall health, including weight and the presence of preexisting conditions
• Smoking status
• Family history
• Occupation
• Participation in risky hobbies, such as hang-gliding or sky-diving

If you're assigned to the lowest risk class, which may be referred to as Preferred Plus or Elite, depending on the insurance company, you'll typically pay the lowest premiums. On the other hand, you may pay the most for life insurance if you're assigned a substandard rate based on health, smoking status, age, or other risk factors.

In addition, if you’re considering a whole life or 澳洲幸运5官方开奖结果体彩网:universal policy, the 澳洲幸运5官方开奖结果体彩网:rate of return on the cash value will drive the premium up or down. A higher rate of return on cash value can go a long way toward keeping policy premiums to a minimum. A lower-than-expected return on cash value will require a higher funding amount to keep the policy in force longer. And age is the most important contributor to both term and whole life insurance rates.

How Insurance Premiums Rise With Age

The annual premium, or “rate,” f🍒or a term life insurance policy is determined at the time of purchase and set for the duration of the policy. “The rate is for the duration of the term,” says Frazzitta.

Typically, the premium amount increases on average by about 8% to 10% for every year of age, according to Ted Bernstein, Director, Life Insurance Concepts Inc. “A 45-yea𝓰r-old male will pay on a🐽verage $1,125 for a new, 20-year term policy with $1,000,000 of coverage,” he says. “The same policy purchased at age 46, will cost $1,225—and $1,345 a year if purchased at age 47.”

The reason every year inches up the cost of term life insurance is simple math. “Every birthday puts you one year closer to your life expectancy and thus, you are more expensive to insure,” says Huntley. He estimates that rates increase every year by 5% to 8% in yo🎉ur 40s, and by 9% to 12% each year if you’re over age 50.

To be able to hold term life insurance prices steady—rather than raising premiums every birthday—insurers spread the premiums you would pay over 10, 20, or ꦕ30 years and average them into one payment, Huntley explains. Instead of paying low premiums when you’re young and very high premiums when you’re older, you pay the same amount every year.

Once the term of your current term policy expires, you could face very steep rates b🍨ased on your age. “If the insured outlives the initial term, the insurance carrie𒆙r must adjust the premium to reflect their new age,” says Huntley.

Permanent life policy rates may be either level (fixed) or they may vary. If they vary, they usually rise as you age. “The premiums are determined by the insurance carrier each year based on actuarial tables," says Frazzitta. "And they increase at each successive age because each year there is a bigger drain on the cash value due to the rising mortality charges."

Qualifying for Coverage

Huntley says age can affect whether a person will qualify for life 澳洲幸运5官方开奖结果体彩网:insurance coverage at all. “Older ages can certainly limit the applicant’s options.” For example, 𓆏most carriers only offer 20-year term policies to those ages 18 to 70, he says. After that, you can't get a term that length✅y.

Other requirements also increase as you age. Every carrier has 澳洲幸运5官方开奖结果体彩网:underwriting requirements🐻 that typically involve certain health-related testing. The older you are, the more testing a carrier will require. For instanc🍸e, a 44-year-old applying for $500,000 of coverage with American General Life Insurance Company will likely be required to have a medical exam, including blood and urine tests. At 45, however, the same person looking to purchase the same coverage may need to have a resting EKG along with the medical exam and lab work.

Additional testing requirements certainly can have an effect on rates because they can catch more health issues. In the case of more senior applicants, life insurance carriers have also begun assessing one's mental condition. Applicants can be declined for failing a cognitive evaluation such as a memory recall test.

The Bottom Line

Because every year of your life can tack dollars on your▨ life insurance premium, try to buy any policy you’re considering before your next birthday. To ensure you receive the best rates for the coverage you’re seeking, obtain quotes from two or three of the best life insurance companies you can find.

If you're still looking, consider talking to an 澳洲幸运5官方开奖结果体彩网:independent agent, who works with more than one insurance company.𓃲 And, once you've found a favorable-sounding policy, be careful to buy no more ♕coverage (dollar amount-wise) than you actually need.