Term life insurance is a type of policy that provides coverage for a fixed duration of time. This type of insurance has been gaining popularity due to its cheaper premiums as compared to whole life policy plans.
However, the policy also comes with its downside in that it has no cash value, and once the contract ends, you get no benefits and nor do your beneficiaries. Compensation is only done in the event of your death within the contract period.
This article seeks to explain how cut off age works on term insurance plans and how it affects your policy.
The cut off age for applying for term insurance varies across different insurance companies. Each company has its own rules and regulations for life insurance based on age.
Most insurance companies will deny seniors who are beyond 65 years old cover under term insurance. However, few will offer for up to 70 years. The elderly poses a high risk to the insurance companies since they are more likely to die or suffer from chronic diseases or terminal illnesses.
As a senior, you may find yourself having a difficult time shopping for term insurance. And sometimes you may run out of luck and find yourself having to settle for guaranteed life policies which are very expensive due to high premiums.
To fully understand how age limits, affect your chances of securing term insurance, we need to expound on the various types of term insurance that exist.
Types of Term Insurance
When selecting which term insurance you are going to settle for, it is essential to consider the different factors that distinguish them. Listed below are five main types of term insurance and the influence of age over them.
Level Term Life Insurance
This is the most common form of term policies that are taken up by most individuals. The monthly or yearly premiums you pay remain flat until the expiration of the contract. The consistent premiums that never increase are the reason for its popularity.
The main disadvantage of this insurance policy is its expiration date. Some companies offer renewal clauses. However, the policy renewal clauses are not a guarantee, and they entirely depend on what your contract states.
These policies can last for a few years, say 5, to more extended periods such as 20 or 30 years. Your age influences the duration of the contract. Seniors will mostly get 5-15 years depending on how old you are.
A 70-year-old person may get cover for up to 15 years max while a 50-year-old can get covered for 30 years.
Annual Renewable Term Life Insurance
Also referred to as an ART, this type of insurance is renewed every year for an outlined number of years. With each renewal, the premiums of this policy increase due to your increasing age.
Statistically, the chances of dying after a year increase of approximately 1% only. This, therefore, makes this insurance policy an expensive choice to go for. Additionally, the chances of the insurer paying out benefits are small since your likelihood of dying within a year is minimal.
This insurance is mostly taken up by people who are not sure about their ability to pay premiums in the future or by people in high-risk jobs where the possibility of death is significant.
Decreasing Term Life Policy
This type of insurance is unique in that the premiums will reduce as time goes by. The drawback is that the payout that your beneficiaries will receive also decreases.
It is usually taken up by people who feel they have pressing financial responsibilities currently, but they will reduce over time. Such financial obligations may include debts or mortgages. Since most people take insurance plans to serve as security for paying out debts or mortgages if the insured dies, their dependents get covered considerably with this plan.
Return of Premium Policy
The ideals of this form of insurance are lucrative in that the policyholder gets back the premiums he or she paid after the expiry of the policy. The payout only happens if the insured is still alive after the expiry of the contract.
It sounds excellent when you think about it, but you will have to part with pricier amounts of the premiums.
The premiums are usually more expensive than conventional term life plans, but they are cheaper when compared to whole life policies.
It is also important to note that the return of premiums is on most cases, partial and not entirely. This insurance plan also lasts or 15 years or longer. Seniors will, therefore, have a difficult time trying to secure it.
Modified Term Life
Just as the name spells out, this type of insurance gets changed, and in some cases, it can be personalized to suit your requests. Modified term policies also include those that come with riders such as long term care or premium waivers. Other types can consist of an insurance contract that is structured to give you increasing premiums, but the death benefits remain constant.
These policies can also be made cheaper for you so that you can afford to pay the premiums depending on your financial situation.
Term life insurance can also be modified to accept a client who is past the age limit but is willing to pay higher premiums.
It is important always to read the terms of the agreement in your clause when dealing with modified term life insurance. This is because the benefits you get tend to come with stringent and guarded terms of the contract.
The Optimum Age for taking Term Insurance
Most experts recommend taking a term insurance policy within the ages of 25 to 50 years. This is because that age bracket is the optimum one for the best premium rates since insurance companies consider you to be at your lowest risk.
At a younger age, when you are starting a family, you could take up a term insurance plan to cover your children or spouse in the event of your death. As you age, you can consider taking up a policy that comes with riders such as long term care.
The main advantage of taking up a term life insurance policy at 50 is that it will have significantly fewer premium rates as compared to taking one at 75.
If you say for instance you take up term insurance of 20 years at the age of 60; if anything happens to you at 70 and you require long term care, the insurance will cover your expenses until you are 80.
Tips on Term Life Insurance Shopping
Shopping for a term life insurance requires an assessment of several factors in order to get the best policy that covers your needs. If you are wondering what factors to seek out when selecting the insurance company of your choice, here are the main factors to consider.
Value for Your Money
You need a term life insurance policy that gives you value for all the premiums you pay to sustain it. You may, therefore, want to consider the policies that come with extra incentives such as disability clauses or long term care.
Another addition mentioned earlier is the return of a portion of the premiums paid if the insurance contract expires before you die.
All these riders or unique aspects of such insurance plans give you more than mere death benefits and thus have better value for the cash you pay as premiums.
Agents can act as the connecting link between you and an insurance company that offers you your desires on term life policy. Agents review the different terms of the policy stated in the clauses of various insurance companies and advise you on the best options.
Well-seasoned agents who have been in the job for years also tend to have connections with the insurers. This makes them at better positions to cut you better deals, especially with modified term policies.
You can always select between using an independent agent or visiting agencies that offer such services at a small fee.
An insurance company with a good reputation will also have proper financial basing. The business capabilities and strengths of an insurance company determine whether it will exist for the next ten years or go under.
You want to entrust the financial security of your future and dependents on a company that will last for generations or decades. Therefore, reviewing the financial performance of an insurer before buying any policy from them isn’t a bad idea.
One thing you do not want is the expiry of your insurance contract when you need it most. If you took a term insurance policy at 65 for 20 years and you live up to 85, you may want to continue getting covered. And you may have to switch to a whole life after 85.
Considering policies that can be renewed even after they expire can come in handy in such scenarios.
If you suffer from terminal illnesses, securing this type of insurance is going to be very difficult. This is especially so if you are a senior. If you have any terminal condition such as hypertension or cardiovascular diseases, you should consider using an agent. Moreover, if you secure a life insurance plan, quit dangerous lifestyle habits, and take better care of your health.
In summary, what you need to know is that almost all insurance companies have age limits on term insurance. These age limits differ across insurance companies, and the closer you are to them, the less the length of your term insurance contract will be.
Always assess the needs you want to be met by an insurer before settling on a plan. Know the various types of policies offered their advantages and drawbacks. This way, when you finally decide on a plan, you will be satisfied and have peace of mind that you are covered in every way you desire.