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This is perhaps best demonstrated. For now, we’re going to ignore health as a factor in premium costs, and focus mainly on age. Since we definitely know you will be ten years older in 10 years, but your health is an undetermined factors.
Let’s say that you are 35 years old male, non-smoker. Given that profile, you can purchase a 30-year term life insurance policy with a death benefit of $500,000, which will be about enough to cover the average young family. The premium for this policy will be $46.22 per month, or about $554 per year.
Now let’s assume that you decide to wait to purchase life insurance until you are married and have children, at about age 45. The cost for the same 30 year term policy for $500,000 will increase to $110 per month, or about $1320 per year. That’s an increase in the premium of more than 50 percent! Plus, it will come at a time when you have family obligations, and extra cash will be short.
You may be able to work around this problem by reducing the term of the policy down to 20 years. At age 45, a 20 year term policy for $500,000 will be $102 per month, or about $1224 per year. That will keep the premium close to what you could have gotten 10 years earlier, however it will reduce the term of the coverage by a full decade.
The fact that the 20 year policy taken at age 45 is just about the same as the 30 year policy taken at age 35 is not a coincidence. In each case, the term of the policy will expire at age 65. That means that the risk between the two policies is just about equal. The only difference – causing a small increase in the premium at 45 – will be the fact that you’re 10 years older. That does carry a slight risk of early death, certainly more so than it would at age 35.
Now let’s factor in health. The younger, healthier you are when you purchase a policy the more likely you will get a preferred rating because you’re less likely to have developed any medical issues. Given that you’ve chosen to wait until you’re 45 with health issues if you purchase a 30-year term life insurance policy with a death benefit of $500,000. The premium for this policy will be $176.69 per month, or about $2,120 per year.
Life insurance premiums are very affordable especially at younger ages. Waiting to apply will cost you more and you also face the risk of developing health issues that will make the premiums even higher.