Life Insurance & Age Factors
Life insurance price is determined by many factors. One of the main factors is age. The older you are, the closer you are to death. Consequently, the older you are, the higher your premium payments will be. Your age also has a direct effect on whether or not you are able to obtain life insurance.
Other People Are Reading
-
Significance
-
Life insurance companies must accurately price life insurance policies so they have adequate reserves to pay claims and enough income to pay operating expenses. Life insurance premiums are calculated based on a formula that includes age, gender, occupation, lifestyle choices such as tobacco, alcohol and drug use, and other factors. This formula is heavily dependent upon a person's age. Because your chances of death are greater as you get older, age is a major factor in what you pay for life insurance.
Function
-
Life insurance companies use mortality tables to determine how much insurance should cost for an individual at any given age. Mortality tables are able to predict the average lifespan of an individual. The tables are able to do this by using the law of large numbers. For example, The insurance company will analyze a large number of individuals, perhaps 100,000 or more, who are between the ages of 60 and 70 and measure how many of those people die, and the common cause of death. By knowing these facts, the insurance company can price life insurance contracts accordingly and make accurate predictions about how much your life insurance policy ought to cost.
-
Benefits
-
Pricing life insurance premiums according to your age ensures that the rates charged by insurers are accurate. If life insurance companies charged artificially low rates, they would find themselves unable to pay death benefit claims. This benefits you as well because you obtain low rates when you're young. These rates can be fixed if you choose a level-premium life insurance policy.
Drawbacks
-
Life insurance gets more expensive as you get older. If you wait to buy life insurance until you are about to retire, your life insurance premiums may be prohibitively expensive. An alternative to expensive life insurance in old age is to set aside a significant amount of your personal retirement savings to pay for burial costs. However, this leaves you with less money to live on during a time when you are likely to be already making less money than you did when you worked full time.
Considerations
-
Consider purchasing life insurance at a young age and holding it for your lifetime. Life insurance purchased while you are young can be paid up well before you retire, leaving you with no insurance premiums when you're a senior citizen.
-
