How does Actual Age and Nearest Age Effect your Life Insurance Premiums?
Like many things in life, timing is everything. And this applies with life insurance too. Did you know life insurance companies use two different methods to determine your issue age? The issue age is the age the policy premiums are based upon. Generally speaking, the younger the issue age, the lower the premiums.
The actual age method is often called the age last birthday. For example: If your date of birth is 10/01/74 and today’s date is 09/06/14, your insurance issue age today would be 40. The nearest age method calculates the issue age based upon the nearest age to your policy date. Ex: If your date of birth is 03/01/74 and today’s date is 09/06/14, the issue age would be 41. Most insurance companies use the nearest age method in determining the policy issue age.
How does actual age and nearest age effect your life insurance premiums? Our coverage on a budget tool and free life insurance quote tool will calculate the proper issue age with each carrier based on the carrier’s issue age method. You don’t have to calculate anything, just enter your state of residence, date of birth and gender – we take the guess work out of the equation. Generally speaking, the younger the issue age, the lower the premium. The quote tools calculate the issue age based on the day you calculate the quote. It’s possible that you can get a quote today and a different quote on a future day, if you have reached an older issue age based on nearest age.
In addition to potentially paying higher premiums due to older issue ages, there are other considerations that may be impacted by the issue age. Term life product availability is based on the issue age of the insured. For example: a 58 year old can purchase a 30 year term policy, whereas the product is unavailable for ages 59 and over. This can be significant if the insured has a 30 year mortgage that they would like to have paid off in the event of death. The 59 year old insured would have to consider purchasing a 25 year term product or perhaps a permanent life insurance product instead.
Most insurance companies allow a policy backdate up to 6 months to save age, if the situation presents itself for the insured’s benefit. Premiums would be required back to the backdated policy date. Backdating a policy may not necessarily be worth the added cost of the premiums. Our PivotCare team can work with you to determine the best course of action for your specific life insurance needs.
About the author: Ken Buccico holds a LUTC designation and has been in the life insurance business for 39 years. His wealth of experience empowers clients to make best possible decision regarding a life insurance policy. To explore the best life insurance option, contact Ken at 1-800-651-1953 or KBuccico@Pivot.com.