How does age affect life insurance rates?

How does age affect life insurance rates?

Most of us go through life assuming we’ll reach a ripe old age—and that’s fair, because most of us do. But if you have dependents, it’s wise to protect them from the financial fallout of your death—even if you’re still young and healthy—by getting life insurance. Your age is a pretty big factor when it comes to the type of life insurance you should get and how much you’ll pay for it. Read on for some insight on this, and a few other factors that may affect your premiums.   

How old you are affects life insurance premiums

“People should think about life insurance when they think they need it the least,” says Natalie Trimble, financial security advisor and investment representative for Freedom 55 Financial, a division of Canada Life. “The longer one waits to get it, the higher the chances that they may experience a health issue. With health issues or lifestyle changes, the possibility of increased costs or maybe even a rating is a direct result.” (A rating means being approved for coverage but also paying more for it.)

The bottom line is: The older you are, the more likely your passing becomes—and with that higher risk comes higher premiums. So if you’re relatively young and healthy, and you have dependents, now is the time. You’re low risk, so your premiums will be low to reflect that.

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How life insurance premiums are determined

The general consensus is that at an early stage in life, term life insurance is typically the most sensible and cost-effective way to go. Just bear in mind that life insurance premiums increase with age, so each time you renew term life insurance (if you choose to), your premiums will go up. However, many term policies come with the option to convert to whole life insurance or universal life insurance—which are forms of permanent life insurance.

Why consider switching to a permanent policy? While premiums generally climb gradually with age, the price increases start getting a bit steeper around the age of 50. With permanent insurance, the premiums don’t increase with age.

Permanent life insurance is more suited to a later life stage, when your debts and mortgage are paid off and your children are grown up. It’s more expensive because there’s a guaranteed payout, but the advantages are that you have lifetime coverage and your premiums won’t go up, even if your health worsens. (Keep in mind that the older you are when you acquire the policy, the more expensive it will be.) It can also serve as an investment vehicle for savings you want to grow for your beneficiaries.

Life insurance rates by age in Canada

The chart below shows the monthly costs of a whole life insurance policy and a 20-year term life insurance policy at the ages of 30, 40 and 50, respectively.

We chose a 20-year term for the term life insurance policy because it’s the most common term length chosen by Canadians. The monthly premiums represent the average of the three least expensive life insurance policies offered to healthy non-smoking people. Life insurance companies often still rely on biological sex to determine risk profiles, so we’ve run the calculations for people who are born male and female; life insurance is typically more expensive for males, whose lifespans are shorter than females’ (79.8 years for males, and 83.9 years for females according to Statistics Canada).

Whole life insurance Term life insurance, 20-year term
Age Female Male Female Male
30 $206.70/month $247.05/month $22.80/month $31.35/month
40 $334.39/month $398.53/month $35.16/month $47.48/month
50 $553.70/month $657.08/month $86.05/month $126.78/month

Other factors that affect your life insurance premiums

In assessing the risk associated with your insurance policy (and therefore how much it will cost you), insurers use many other factors besides age. These include:

  • Biological sex: Females typically pay less for life insurance than males because they live, on average, five years longer. 
  • Smoking: Smokers are more likely to face certain health conditions, so this factor can drive up your premiums significantly.
  • Past and current health issues: Chronic illness will increase your premiums,as will health issues like high blood pressure or obesity, which could contribute to potential future health issues.
  • Driving record: If you have been charged with a few driving violations within the past three to five years, you might be considered higher risk.
  • Mental health: If you live with depression or other mental illnesses, which are associated with higher mortality rates, you may have to pay more.  
  • High-risk activities: If you jump out of planes or climb mountains on a regular basis, expect that to impact your premiums.
  • Payment schedule: If you pay annually for your life insurance instead of monthly, you might save some money.

Most insurers don’t require you to have a physical exam these days, but they will ask you questions about your health, and you have to be honest—if you lie or omit key information and it’s discovered after you die, that could void your policy or decrease the payout to your survivors.

Can seniors get life insurance?

Yes. There are life insurance options available to seniors. Don’t worry too much about the terminology, though. Insurance companies use your specific age—not a broad characterization like “senior”—to determine your eligibility and premiums. For example, if you are 65 years old and want life insurance, the company will account for your age in its premium calculations. You will likely pay more than a “senior” who is 60.

When obtaining a new policy, there are certain age restrictions to be aware of. Many companies will not issue new term life insurance policies to individuals aged 75 or more (however, policies obtained prior to turning 75 may offer coverage until the age of 85). For whole life insurance, many companies will not issue new policies to individuals who are 85 or older.

Final thoughts

It’s good to be aware of how age affects the cost of life insurance, but you should avoid basing your decision to get life insurance on age alone. After all, whether you need life insurance at all comes down to your needs and lifestyle—for example, whether or not you have dependents, a mortgage or significant end-of-life expenses. No two people of the same age are the same.

If you feel your needs require life insurance, or if you simply want the peace of mind that comes with having it, it’s better not to delay speaking to an insurance broker or provider.

This article was originally published on March 10, 2021. It was updated on Sept. 13, 2022.

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