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What is the impact of age on life insurance premiums?

Impact of age on life insurance premium

At what age should one reasonably get a life insurance policy? Your neighbour may already have a life insurance policy, even though he is only 24 years old. You might decide to buy a life insurance policy at the age of 45. As such, it is never too late to buy life insurance, and there is no right or wrong age to do so. Life insurance plans provide protection to your family and dependents from financial hardship, so it is definitely wise to hold one. When you get it depends on what aligns with your financial and investment needs. But it would be useful for you to know how your age affects life insurance, more specifically the life insurance premium you will be paying under such plan.

What is life insurance premium?

A life insurance premium is an amount paid by the policyholder periodically to the life insurance company to maintain the insurance coverage. The premium pays for the cost of insurance in pure protection plans, whereas in plans with an investment component, part of the premium goes into an investment. Such premium payments are required to be made regularly. An inability to make these payments could lead the policy to lapse. Considering that life insurance premium is the price of the insurance policy, it is an important element in the process of buying insurance. There are multiple factors that determine what premium you will pay. These factors include your medical history such that being susceptible to a critical illness translates to higher premiums. Your smoking habits and alcohol consumption are seen in similar light for premium calculation. Other factors include gender, occupation, your hobbies, family medical history.

Finally and most importantly, age. Your age is one of the biggest determinants of the premium under life insurance plans.

How does age affect life insurance

In general, the rule of thumb says that the best time to buy insurance is while you're young, because the premiums will be low, everything else remaining constant. The logic is simple: it is considered that if you are young you are healthier, less susceptible to illnesses that come with the decay of life. Therefore, you have lesser health-related risks, and by extension a lower premium. Insurance companies may require you to undergo medical tests before issuing a policy above a certain age, so youth plays in your favour.

The younger you are, the relatively cheaper plan you get owing to the low risk of mortality. At older ages, you will have more responsibilities, debts, obligations which means you will require greater financial protection to secure your family’s future. It will be advisable to buy a term policy with a large cover. This would, again, translate into a higher insurance premium.

It is always wise to get life insurance early in your professional life - the sooner, the better. The benefits of life insurance are worth considering: besides providing protection, life insurance premium also helps save on tax. As per the current provisions of Section 80C of the Income Tax Act, 1961, policyholders can avail tax benefits of up to Rs.1.5 lakh on life insurance premiums. Also, the proceeds received under the death/maturity benefit are tax-free under Section 10 (D) of the Income Tax Act, 1961.

If you opt for a good insurance policy like the Future Generali Care Plus Term Insurance Plan you can also further strengthen the financial protection by adding riders: A rider is an add-on insurance plan that provides you with additional insurance cover along with your regular insurance plan by paying an additional nominal premium. An accidental death rider,for example, will provide additional insurance cover against death due to an accident. A plan like Future Generali New Assure Plan Plus will accord flexibility to choose any combination of the policy term and premium payment term based on your financial goals. It will even give an opportunity to enhance your maturity payout by way of bonuses.

Now, while the premiums might be low if you buy a term plan when you’re young, you should also make an assessment of the coverage you need. You will need coverage only if you have dependents to look after. That said, if you buy a life insurance plan in your 20s you will benefit from shelling out lower premiums than say, someone in his 50s. Always read the fine print, choose wisely and act early!

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