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Impact of age on Term Insurance Premiums

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September 01, 2022

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Does age impact your Term Insurance Premiums?

It is important to provide financial protection to protect our loved ones from financial hardships in our absence. The best way to do this is investing in Term Insurance. It is one of the best affordable and straightforward life insurance plans that will help secure your family’s financial future. But before you make a commitment, it is important to understand how your term insurance premiums for the policy is determined.

What are term insurance premiums?

A Term Insurance is a protection plan which is designed to payout death benefits to the beneficiary or nominee in case the policyholder passes away during the ‘term’ of the policy. A Term Insurance premium is nothing but the amount paid by the policyholder in exchange for this coverage. You have to pay your premiums periodically as agreed to maintain the life cover but if you do not pay the premium, the policy will lapse and the policy will not be in effect.

There are multiple factors that determine the amount you pay as your term insurance premium. These factors include your medical history, smoking habits, occupation, etc. but the most important factor is age, which plays a critical role in determining the term insurance premium you will pay. If the policyholder is young, they may qualify for lower premium but if they are older, chances are that they may not even be qualified for the insurance.

How does age affect term insurance premiums?

You may know someone who is only 25 and has life insurance but there may be a 40-year-old who may not have life insurance. There is no right age to get a Term Insurance but the universal rule is to start young. The logic is that when you are younger, you are considered healthier, have less responsibilities and hence also considered to have a lower chance of illness or mortality so you will end up paying a lower premium and have larger cover but when you are older, you have more responsibilities, more liabilities like loans, obligation or even health risks hence you will have to pay higher premium.

Let’s understand the impact of Term Insurance Premiums for different age groups:

  • When you are in your 20s:

    Most individuals start their careers in their 20s and are either salaried or self-employed. They may have easily manageable liabilities like an education loan, are younger and most likely healthy and not married. This allows a person to have larger coverage with the best term plan and lower premiums, which in turn allows dependents to pay off debts easily.

  • When you are in your 30s:

    Most individuals start planning for a family in their 30s. They may also have higher financial liabilities like a car loan or home loan. You may not be able to afford a higher term insurance premium given you have more financial obligations to cover in your absence. If you can’t afford a higher term insurance premium, then you may opt for one that may provide enough cover to cover your existing debts yet suit your lifestyle.

  • When you are in your 40s:

    If an individual is in their 40s, then most of their debts like home loan or car loans are paid off. A retirement planning or medical expense will take higher priority hence it will need a comprehensive planning as per term insurance age limit criteria to secure your future goals, which will then determine your Term Insurance Premium.

  • Already in your 50s:

    You are still eligible for a Term Insurance Plan but will have to pay a higher premium as it falls within the maximum age limit for Term Insurance plans. It will cover critical illness and any unpaid debts you may have but make sure to read the terms and conditions carefully.

Now, while you will benefit from shelling out lower Term Insurance Premiums in your 20s than someone in their 50s, you should also take into account the actual coverage you need for your dependents. Talk to an expert for a more informed decision so you can choose wisely!

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ARN: ED/07/22/28169

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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