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Rates Greatly Can Vary For Term Life Insurance By Age

By Mike Heuer

In general, the younger you are the cheaper it is to buy term life policies since rates can vary greatly for term life insurance by age. And the longer the term combined with higher age bracket, the more a term life plan will cost.

Term life rates are determined by the age of the named insured, his or her general health and whether or not tobacco products are used. Answers are then compared to mortality tables so life insurers can accurately predict the likelihood of someone dying while the term life plan is in force. That means a young person in generally good health and who does not smoke cigarettes of engage in dangerous activities, like racing motorcycles, can obtain a term life insurance plan with a large death benefit for much less than a person who is 20 years older and in similar health and seeking the same death benefit.

The older someone gets, the harder it can be to purchase even 10 year term life plans without paying a high rate for it. Using sites like this one with its free online term life quote tool can help obtain differences on costs for term life policies based strictly on age. A person who is 40 and looking for $1 million in term life coverage for 30 years might pay as much as $1,200 per year in premiums that will remain the same throughout the term. But someone 10 years older and looking for the same coverage might pay as much as $3,000 per year in premiums for the same death benefit from a 30 year term life policy.

A person who is 60 and looking for a term life plan with the same death benefit might not qualify due to a high likelihood of dying while the term is in effect. Term life insurance is considered by many to be the purest form of life insurance due to the fact no cash value is required to pay a death benefit. By contrast, a whole life policy with the same death benefit required would be easier and possibly even less cost than for a term life plan for someone in his or her 60s.

The primary difference between a term life plan and a whole life insurance policy is the fact cash value is used to pay the death benefit of a whole life insurance plan. And most whole life plans wind up paying a death benefit. So, essentially, a whole life plan operates much like a long-term savings plan that grows a small amount of interest over time. The policy matures when the cash value is equal to the death benefit. Because the policyholder essentially provides the money that eventually will be paid out, the older someone gets, the closer the rates for term life and whole life plans become.

Studies show anywhere from 90 percent to 99 percent of term life plans do not pay a death benefit. But the older the policyholder is, the higher the rate for term life insurance by age.