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1. Graham Cleveley | Graham Cleveley Brighton Insurance
Thinking of purchasing a new life insurance policy? Before you make a commitment, it’s
important to understand how the annual premium for a new life insurance policy is determined.
Whether the policy you’re considering is term (a policy for a set amount of time), whole (a
policy that accumulates a cash value) or universal (a flexible policy that also builds cash value,
but lets you shift between the policy’s insurance and savings components), the annual premiums
are influenced by a number of factors about your life. Among them are gender, the quality of
your health and if you are, or ever were, a smoker. Family health history (did a parent have
cancer or heart disease?), hazardous hobbies/activities such as hang gliding or scuba diving,
international travel, your height and weight, and occupation (if you have a dangerous job or one
with a higher-than-average mortality rate) can also affect the amount you’ll pay.
If you’re considering a whole life or universal policy, the rate of return on the cash value will
also 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,” says Reno Frazzitta, an investment advisor,
certified retirement counselor and president of Secure My Funds in Clinton Township, Mich. “A
lower-than-expected return on cash value will require a higher funding amount to keep the policy
in force longer.”
But as Chris Huntley, director of marketing at JRC Insurance Group, in San Diego, Calif.,
explains, “Age is the most important contributor to both term and whole life insurance rates.”
How old you are plays the biggest role in how much you’ll pay to purchase a new life insurance
policy.
The Age Factor
The annual premium, or “rate,” for 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 about 8% to 10% for every year of age, according to
Ted Bernstein, CEO, Life Insurance Concepts, Inc. “A 45-year-old male will pay on average
$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’re are more expensive to insure,”
says Huntley, who reports that rates increase every year by 5% to 8% in your 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 30 years and average

2. 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 based on your
age.
“If the insured outlives the initial term, the insurance carrier must adjust the premium to reflect
their new age,” says Huntley.
Whole life policy rates do rise with age, however. “The premiums are determined by the
insurance carrier each year based on actuarial tables. 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,”
says Frazzitta.
Qualifying for Coverage
Huntley says age also affects whether a person will qualify for life insurance coverage at all.
“Older ages can certainly limit the applicant’s options.” For example, most carriers only offer
20-year term policies to those ages 18 to 70, he says. After that you can’t get a term that long.
Other requirements also increase as you age. “Every carrier has underwriting requirements that
typically involve certain health-related testing,” says Huntley. “The older you are, the more
testing a carrier will require.” For instance, 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 testing. At 45, however, Huntley says the same person looking to
purchase the same coverage will needs to have a resting EKG along with the medical exam, and
blood and urine tests.
“Additional testing requirements certainly can have an effect on rates because they can catch
more health issues,” he says. Life insurance carriers have also begun cognitive testing for senior
applicants. “I recently had policies declined because an examiner went to my 75-year-old
applicant’s home and listed 10 items in the room. My client could only remember three of the 10
items and was declined for coverage due to what was thought to be a cognitive impairment.”
The Bottom Line
Because every year can tack dollars on your life insurance premium, try to get any new life
insurance 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 life insurance companies.