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How Does Age Affect Life Insurance?

Comparing term and whole life policies to help you determine when the best time to buy life insurance may be.

With age comes wisdom. But it also comes with higher life insurance rates

 

It’s simple logic – as you age, we get closer to death, and therefore insurance companies want to hedge their bets when it comes to your life insurance policy. With a greater probability that the death benefit will payout, life insurance companies charge more to ensure they have enough capital to keep their policies viable. 

 

If you’re going to pay more for life insurance as we age, do you need it? 

 

Consider this: as we get older, we’re also more likely to have people who depend on us financially. Whether it’s a spouse, children or the bank that wants your mortgage paid off, we become more fiscally entwined with others as our lives progress. 

 

The purpose of your life insurance payout is to help settle any outstanding debts, as well as provide financial support for your loved ones.  You can use the benefits for your children’s education, cover funeral costs, and pay off mortgages  – any form of support they require.

 

So what does life insurance cost, anyway? For our examples, we look at a healthy, non-smoking individual. The life policy is for $500,000, with the annual premium payments (not monthly) with regular underwriting. 

 

For term life, we look at Traditional Term 10 and Term 25. You can find the lowest and highest annual quotes below for reference (all amounts in CAD).

 

Definitions: term life vs. whole life

TERM LIFE INSURANCE: Term life insurance covers you for a certain number of years, otherwise known as the term, at a fixed rate. If you pass away before your term’s end, your beneficiary will receive the payout of your policy.  When your term expires, you will have to renew (at a higher rate due to ageing) or find an alternate approach. At any time while your policy is in effect, you can convert it to permanent/whole life or universal life insurance. Most term life policies do not insure you past the age of 85.

 

WHOLE LIFE INSURANCE: Whole life insurance provides a guaranteed death benefit for life, so long as you continue to pay your premiums. Whole life insurance also has a savings component, where your cash investment builds up, and you can withdraw from it or borrow against it.

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Annual Canadian life insurance rates by age chart



AGE & GENDER

TERM LIFE 

10 Year Term

(price based per year)

 

LOW

HIGH

25 Male

$255.00

$630.00

25 Female

$175.00

$485.00

30 Male

$249.00

$630.00

30 Female

$180.00

$485.00

35 Male

$265.00

$655.00

35 Female

$199.50

$490.00

40 Male

$345.00

$700.00

40 Female

$244.50

$570.00

45 Male

$525.00

$1,025.00

45 Female

$358.50

$745.00

50 Male

$810.00

$1,700.00

50 Female

$555.00

$1,125.00

55 Male

$1,405.00

$4,945.00

55 Female

$1,000.00

$1,765.00

60 Male

$2,430.00

$4,315.00

60 Female

$1,710.00

$2,595.00

65 Male

$4,410.00

$8,085.00

65 Female

$2,975.00

$5,565.00



AGE & GENDER

TERM LIFE

25 Year Term

Price based per year

 

LOW

HIGH

25 Male

$ 410.00

$ 860.00

25 Female

$ 290.00

$ 555.00

30 Male

$ 448.62

$ 895.00

30 Female

$ 333.00

$ 610.00

35 Male

$ 545.00

$ 945.00

35 Female

$ 402.38

$ 695.00

40 Male

$ 820.00

$ 1,150.00

40 Female

$ 610.00

$ 970.01

45 Male

$ 1,310.00

$ 1,825.00

45 Female

$ 970.00

$ 1,540.01

50 Male

$ 2,190.00

$ 3,195.00

50 Female

$ 1,581.75

$ 2,545.01

55 Male

$ 3,645.00

$ 4,740.01

55 Female

$ 2,590.00

$ 4,740.01

60 Male

N/A

N/A

60 Female

N/A

N/A

65 Male

N/A

N/A

65 Female

N/A

N/A



AGE & GENDER

WHOLE LIFE

Price based per year

 

LOW

HIGH

25 Male

$ 2,378.43

$ 7,230.00

25 Female

$ 1,959.10

$ 6,290.00

30 Male

$ 2,926.51

$ 8,565.00

30 Female

$ 2,481.99

$ 7,535.00

35 Male

$ 3,713.03

$ 10,230.00

35 Female

$ 3,122.36

$ 9,185.00

40 Male

$ 4,635.00

$ 12,330.00

40 Female

$ 3,950.98

$ 11,130.00

45 Male

$ 6,045.00

$ 14,920.00

45 Female

$ 5,080.00

$ 13,450.00

50 Male

$ 7,465.00

$ 18,145.00

50 Female

$ 6,285.00

$ 16,310.00

55 Male

$ 9,745.00

$ 22,280.00

55 Female

$ 7,895.00

$ 19,275.00

60 Male

$ 12,850.00

$ 27,765.00

60 Female

$ 10,835.00

$ 23,020.00

65 Male

$ 17,290.00

$ 34,865.00

65 Female

$ 15,395.00

$ 29,065.00




NOTE: Term life 25 information was unavailable for 60 and beyond as most policies do not cover individuals past 85 years of age.

 

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How does age affect life insurance?

The first thing you’ll notice in the charts is the amount you pay for life insurance increases as you age.  More than that, there’s a steeper jump in rate as the years pass.  If you’re signing up for life insurance for the first time later in life, expect to pay a much higher premium.

 

The next thing you’ll notice is the significant difference in the amount you’ll pay for term life versus whole life insurance. Why is whole life insurance so much more expensive?  Let’s consider what while life insurance entails.

 

When you sign up for whole life insurance, you’re locking into a premium for your entire life.  Because you’ll be paying the same rate at 25 that you will at 65, insurance companies want to ensure they have ample capital to cover you no matter your age. 

 

If you want to lock into a policy and not have to think about life insurance again, whole life insurance might be for you. But be aware that the cost-benefit of choosing such a policy might not be that great. 

 

If you’re getting life insurance for the first time, you may be better buying a term policy and investing the money you save instead. For instance, a 35-year-old male pays $3,713 per year for his whole life policy or $545 per year for his 25-year term life policy, a difference of $3,168. If you invest $3,168 per year ($264 per month) with a roboadvisor, after 25 years, it’s worth $134,336, based on an annual return of 7%. 



TIP: If you choose whole life insurance, be sure that you’ll be able to afford the higher premiums throughout your life, as you wouldn’t want to miss a payment and have your policy cancelled. Generally speaking, whole life insurance is for high-income earners (greater than $250,000 annually).

 

Term life insurance is an excellent option if you require insurance but anticipate that your needs will change as you age. With terms ranging from 1-40 years, you can typically find a policy that suits you no matter what. 

 

Combining term and whole life insurance

 

Consider why you need a life insurance policy. For instance, are you looking to provide financial support for your family after your death? Do you want your policy to cover your funeral costs and any outstanding debts?  Because you can combine policies – a term life policy for debts, income replacement, mortgage, and your children’s education and a less expensive $15,000 whole life policy to cover funeral expenses. 

 

Take the time to assess why you need life insurance, and find the best policy for your needs. If you’re young, single, and don’t have much debt, a 10-year term might be an excellent place to start.  That way, if your life situation changes, you can choose a longer-term when you renew your coverage to meet your new needs.

 

Other factors that affect life insurance premiums other than age

When you apply for life insurance, a life insurance broker or broker will ask many questions, and you may have to undergo a physical as well.  They do this to determine your overall health and find out things that might affect your longevity. 

 

Remember: When filling out a life insurance application, be sure to answer honestly. If you omit or provide false or misleading information, they can cancel your policy or deny a claim (when your family needs it most). 

 

Gender

As you can see in the charts above, females pay less for life insurance than males do. That’s because females have a longer life expectancy and generally take fewer risks. With death benefits typically paying out sooner for males, it also follows that men will have to pay higher insurance premiums.

 

Health

Are you an active individual with no history of health problems? Are you overweight and on medication? Your overall health is one of the primary factors affecting your insurance premiums.  The healthier you are, the lower your premiums. This is one of the reasons that to qualify for life insurance, you may have to undergo a physical. Specific life insurance policies are available without this, but the premiums are generally higher.

Smoker

There’s a higher risk for illnesses and premature death if you smoke.  Smokers can anticipate having to pay anywhere from 30%-300% more on their life insurance premiums than non-smokers. If you can quit and wait a year before applying for life insurance, it can significantly affect your pricing. 

 

Be aware: Vaping can affect your life insurance premiums just as much as smoking.

 

Lifestyle

The type of life you lead can have a significant impact on your insurance premiums.  Alcohol consumption, criminal records, and other historical risk factors are taken into consideration.  Insurance companies are thorough when underwriting you, and the questionnaire you fill out helps them determine your rate. 

 

Things like your career and hobbies even play a factor in determining your fees. Suppose you’re in a riskier line of work, like policing or mining, or have a hobby that has greater chances of injury like heliskiing. In that case, you can anticipate paying more for life insurance.

 

Genetic history

If there is a long history of things like heart disease or cancer in your family, then there is a greater chance you will suffer from it. Insurance companies want to know this when assessing you and determining your premiums.

 

Policy type

There’s a significant difference in the premiums you’ll pay if you have term life insurance or whole life insurance.  But within each form of insurance, there are also add-ons you can get and different plans and packages. If you choose term insurance, for instance, the length of the term will impact the bottom line.  Similarly, the amount of coverage you want will affect the cost.

The bottom line

 

There are a lot of things to think about when considering life insurance.  How long do you need coverage? How much coverage do you require? What do you anticipate your dependants using the death benefit? When considering life insurance, be sure to explore what options are available to you under different policies, and compare rates to find the best price for you.

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How much life insurance do you need?

 

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