How Does The Cost of Term Insurance Change With Age?

When Sheetal first began working at an MNC she had long aspired to be a part of, the best part was their employee insurance policy. Not only could she now avail low-cost insurance for herself, but she could also have policies made for her parents who were now older and suffered from several health complications.

When she informed the insurer that she would be requiring 3 insurance policies for herself and both her parents, she was told that the cost of term insurance by age would make it difficult for her to avail equitable insurance policies for all 3 of them.

The premium for term insurance policies is largely dependent on the age of the insured. Typically, the cost of term insurance by age is an increase of 10% for every year.

This is because the older person is, the nearer they are to their life expectancy age. Thus, older persons seeking to be insured are considered to be more at risk of contracting life-threatening illnesses as compared to younger individuals.

When a person approaches an insurer, their cost of term insurance by age is taken into consideration before they are provided with a quote.

The insurer typically calculates the number of years for which they are to be insured, and the amount of insurance they require and then split up the insurance premiums so that the insured person pays the same amount as premium over the tenure.

This will ensure that the insured person does not have to pay low premiums when they are young, and the premiums don’t gradually increase over a period of time.

The changing cost of term insurance by age implies that younger persons have access to more benefits while seeking insurance,
as opposed to older persons. Read on to learn the benefits of investing in term insurance at a young age.

Better health results in cheaper premiums

Since young people are assumed to be in better health as compared to older people, they are also considered lower risk for insurers. As a result, younger people seeking insurance can buy the policy at a much cheaper premium as compared to the older generations.

For persons seeking to be insured, it is much better to purchase insurance when they are young and have not yet contracted any serious illnesses.

Lesser responsibilities so can pay more

Persons in their 20s, who are seeking insurance, can afford to pay more in the form of premiums because there are fewer dependents on them as compared to those who are older by even 10 years.

Thus, younger persons can opt for flexible payments wherein they pay higher amounts at the beginning of their insurance tenure, when they are young, and pay lesser as they get older.

A lot of flexibility is available to younger persons seeking insurance, and they should seek to take full advantage of it.

More options across insurers

Insurers are always on the lookout for younger term insurance policyholders since they offer the least risk in terms of coverage.

As a result, many insurers will offer lower premium rates to attract more people. Younger persons seeking insurance thus, have a range of
options when it comes to availing term insurance policies.

Tax savings from a Young Age

Investing in term insurance policies offers tax benefits better than any other financial instrument.

Hence, if one starts to invest in term insurance policies from a young age, they are able to avail tax benefits from a younger age as well. This allows for higher amounts of savings and allows people to benefit from the tax exemption benefits offered by insurers.

Compulsory Savings

As a young professional, it is tempting to go out with friends and celebrate the smallest of occasions. However, if one invests in a term insurance policy, it results in them forcefully having to save by paying these premiums.

This not only results in mandatory savings from a young age, but also proves useful in later years. The cost of term insurance by age changes owing to the conceptions held by insurers that old people are more susceptible to diseases than younger people.

Suggested Read: 5 Things You Know About Life Insurance That’s Causing Faulty Insurance Decisions.

Thus, it is best to start investing in term insurance policies since a younger age and avail benefits for a longer period of time!