Why Does Your Term Life Insurance Premium Increase with Age?

Picture this: You’re in your mid-twenties, juggling work, financial security, friends, and maybe even a few aspirational goals like buying a home or travelling the world. You consider term life insurance but think, “I’ll get to it later”. Time flies and suddenly, you’re thirty-five. You revisit term insurance only to find that the premiums have increased significantly. What changed? Your age. Every year you wait to buy it, the premium you pay grows higher. And it’s not just a little bump. The higher premiums can significantly dent your financial plans down the line. This article unpacks why your term life insurance premiums increase with age and why acting early is necessary.

How Term Life Insurance Premiums Are Determined?

Your term  insurance premiums are calculated carefully based on many critical aspects. By doing this, they are assessing the risk they will be taking by selling you the policy. Understanding these factors can help you grasp why premiums vary and how you might manage your costs more effectively.

Age

Age is not just a number… at least not for an insurer.  Age is one of the most important factors in deciding your life insurance premium. Insurers use age as a marker for health risk and life expectancy. The younger you are, the lower the likelihood of health complications, which means you are perceived as a ‘lower risk’. As you age, the probability of health issues such as heart disease, diabetes, or other chronic conditions increases, leading to a higher probability of claims.

Consequently, insurers adjust premiums upward to account for this increased risk. For example, a 25-year-old buying a ₹1 crore policy is likely to pay much less than a 45-year-old for the same coverage.

The price difference isn’t just about age — it’s about the increased likelihood of claims as you get older. If you need help assessing your requirements you can use the Term Insurance Calculator from Bandhan Life.

Health

Existing health conditions increase the likelihood of something going wrong in the long run. Naturally, age and health conditions are correlated. Insurers assess your medical history, pre-existing conditions, and current health status and determine the insurance premium. If you have conditions such as high blood pressure, diabetes, or a history of heart issues, you are seen as a higher risk. This increases the probability of claims, prompting insurers to raise your premiums to cover these risks.

For instance, consider a non-smoker with no pre-existing health conditions versus someone with diabetes. The latter might pay significantly higher premiums due to their elevated risk profile. However, if you’ve adopted healthier habits --like quitting smoking, managing chronic conditions, or maintaining a balanced diet - you could lower your premium.

Policy Duration

The term length of your policy is another critical factor. A longer policy term means insurers are covering you for an extended period, increasing the probability that you might develop health issues or face life circumstances that could lead to a claim. Insurers cover this extended period by charging higher premiums. Here, too, age is a critical factor in deciding the premiums. When you are younger, longer policy durations have many more potential claim-free years, and insurers account for those years as well.

For instance, if you opt for a 20-year term policy compared to a 10-year term, your premiums will likely be higher due to the extended risk period. However, this is balanced by offering more comprehensive coverage for a longer duration, which might be necessary if you have financial dependents that require protection well into the future.

Lifestyle Choices

Your lifestyle choices also play a key role in premium determination. Insurers assess habits such as smoking, drinking, and engaging in high-risk activities like skydiving or rock climbing. These activities are associated with a higher likelihood of accidents or health complications, which increases the insurer’s risk of paying out claims.

For example, someone who smokes is seen as a higher risk, leading to a policy premium two to three times higher than a non-smoker’s. Similarly, those with risky lifestyles can expect higher premiums.

Why Start Young?

Higher premiums for older applicants aren’t meant to penalise them; it’s simply a reflection of the insurer’s need to balance risk and cost. Which is why, it is advisable to secure a term life insurance policy at a younger age. To understand the financial impact of waiting, let’s break down how premiums escalate as you age:

• In your 20s, premiums are at their lowest. For instance, a healthy 25-year-old might pay ₹5,500 annually for a 20-year term plan with a ₹50 lakh sum assured.
• By 35, the premium could jump to ₹7,000 annually for the same policy.
• By 45, expect to pay an annual premium of almost ₹15,000 annually.

The older you get, the sharper the rise in premiums. This increase is exponential, not linear. This means, you can expect a two-fold increase in your term insurance premium between your 20s and 30s, but it might increase by five times between 30s and 40s.

The Financial Impact of Delaying Term Insurance Purchase

Let’s crunch some numbers to see how delaying affects your pocket. Suppose Rajesh, 30, a non-smoking businessman wants to buy term insurance but decides to wait until he’s 40 to buy a term plan to cover him till the age of 70. Here’s how it plays out:

• At 30, he’d pay roughly ₹14,000 annually for a ₹1 crore sum assured
• By 40, the same policy will cost him ₹25,000 annually
• Rajesh’s delay cost him an additional ₹11,000 in premiums. That’s money he could have invested or used for other financial goals.

Factors Other Than Age That Influence Premiums

While age is critical, it’s not the sole factor influencing premiums. Here are a few others:

Gender: Statistically, women tend to live longer than men, so they often enjoy slightly lower premiums.

Smoking: Smokers beware! Insurers see smoking as a significant risk factor. A smoker’s premium can be nearly double that of a non-smoker.

Occupation: Jobs involving physical risk, such as construction work or flying a plane, often result in higher premiums compared to desk jobs.

Chosen Sum Assured: Higher coverage amounts naturally lead to higher premiums. However, they’re essential for adequate family protection.

Premium Payment Tenure: Shorter payment tenures often result in higher annual premiums, whereas spreading payments over the policy term can make them more affordable.

The Bottom Line

Purchasing term life insurance isn’t just about ticking a box. It’s a strategic decision for your financial future. Age significantly impacts the premium you’ll pay, and delaying this decision can be harmful to your finances.

Beyond age, factors like health, lifestyle, and policy terms also play a crucial role. But the message is clear: the earlier you secure term insurance, the more you save and the better prepared you are to safeguard your family’s future. So why wait? Buy life insurance online today and take the first step towards financial peace of mind.

Frequently Asked Questions

Can I lock in a lower premium if I buy term insurance at a younger age?

Yes, purchasing term insurance early allows you to lock in a lower premium, which remains consistent throughout the policy term.

How does delaying the purchase of term insurance impact the cost?

As you age, the risk profile associated with life insurance increases due to higher chances of developing health issues. This leads insurers to adjust your premiums accordingly, raising them substantially.

Delaying not only raises your cost but also increases the risk of being priced out of affordable coverage entirely. If you wait too long, you may find that the premiums become unaffordable, especially as the likelihood of health complications increases with age. This not only affects the immediate financial burden but also the long-term benefits of securing protection early.

Can lifestyle changes offset age-related premium increases?

Lifestyle changes like quitting smoking or improving fitness can lower premiums to some extent, but they cannot entirely negate the impact of age-related increases.