How does age effect my term assurance premiums?

Like with medical conditions, your term assurance premiums are decided upon depending on the likelihood that the insurance company will have to pay out on the insurance. Should your medical conditions show a likelihood that you might die during the period, the term assurance company may either deny you term assurance cover or charge you high premiums. Your age is not a medical condition exactly, but it is a physical condition.

People don't die of young age, do they? Rarely. But they do die of old age. Not only that, as they and their bodies grow older, they become weaker physically, and are more susceptible to medical problems. Because of this, life insurance premiums will be higher the older you are, and this applies even more for insurance directly related to your health, such as critical illness.

Critical illness policies cover risks from cancer, strokes and heart attacks among other specified illnesses. These illnesses have the same effect on your income as death, in that you will be unable to work, and thus your dependents need to be protected financially. Worse, in a financial sense is that you will need to be protected and the cost of your care could be prohibitive.

When critical illness premiums are set, the chances of your being diagnosed with one of the specified illnesses become higher the older you are, and this is reflected in your premiums.

In a hypothetical case, Bob (who is 40 years old and a non-smoker) is able to buy a basic critical illness policy covering heart attack, cancer and strokes with a benefit sum of £400,000 for £1,604 a year from a company. This policy is renewable at guaranteed prices until Bob reaches the age of 75. When Bob turns 50, his annual premium will rise to £4,216, when he turns 50, it will be £6,684 and over the age of 70 Bob will have to pay £10,580.

Now, Bob could choose to pay a level premium option to avoid the considerable increases in the premiums when he is older. In that case he would have to pay £2,728 each year throughout the lifespan of the policy, up to the age of 75. But what that means is that when he is 40 he is having to pay an extra £1000 a year as the premium is calculated to cover him when he is 75 at the same cost.

So you can see from these figures that the age of the life insured affects premiums in that the older a person is, the higher the premium they need to pay. With term insurance, the starting premium will be higher the older the life insured when the policy starts.

 

 

 

 

 

 

 

© AskFinancially.com 2008

Life Insurance

Ask About

> Life Insurance Advice
> What are the laws and regulations regarding life insurance in the United Kingdom?
> Who are the Financial Services Authority (FSA)
> Which life insurance products are not regulated?
> What are the types of life insurance policies available?
 > What is term insurance?
> What is Whole of Life insurance?
> What is the difference between term insurance and whole life assurance?
>What is critical illness insurance cover?
> What is Key Man or Key Person cover?
> What is Mortgage Protection Insurance?
> What do I do if I need to make a claim?
> Can I take out a UK life insurance policy if I am working abroad as an ex-patriate?
> Are the life insurance laws different in Scotland?
> Are the life insurance laws different in the EU?
 > What do I need to know about a Financial Advisor and whether they are qualified to give me professional advice?
> How do I find the cheapest life insurance for my requirements?
> Do some Insurance companies specialise in smokers?
> What are the advantages of taking out a joint life policy with ones spouse?
> How do I complain about a life insurance company?
> How do I complain about a Financial Advisor?
> How do I complain about Misleading advertising?
> How are my insurance premiums affected if I have medical problems?
> How does age effect my term assurance premiums?
> What does it mean when they say they are "loading" a policy?