Top 5 Factors that effect Life Insurance rates for Seniors

When seniors are shopping life insurance, they most often will not be looking for fully underwritten (full medical exam) term life insurance. Term insurance only covers a certain period (5, 10, 20 years) and most seniors will want permanent coverage. Also, they will be searching for a “simplified issue” policy that only asks a few medical questions, rather than a full medical exam with lab work. The solution for seniors is a simplified issue whole life (permanent) policy. These types of policies are sometimes called final expense benefit policies or funeral policies because that is often the primary need.

Here are the Top 5 Reasons that affect your rate of a simplified issue policy.

1. Age. It is probably not surprising that age is a primary factor that effects life insurance rates. It is a factor whether the person is a senior or younger. As we age, we get closer that day when we will pass and therefore a higher likelihood that our life insurance will pay. For rate calculations, most insurance carriers look at the “closest age”, so if you are 6 months past your birthday, the insurance carrier will calculate the premium based on your next birthday age.
2. Gender. Sorry guys, but on average, women live longer. Everything else being equal, a female will have a lower rate than a man.
3. Tobacco Use. Rates for smokers are higher than non-smokers. Insurance carriers have calculated the likelihood of a smoker developing a health problem that would accelerate death. On the other hand, there are policies that have non-smoker rates as long as the person plans to quit within 3 years.
4. Location. Although where you live does not affect your rate, not all policies and insurance carriers are available everywhere, so the best price might not be available in your area.
5. General Health Classification. Again, a simplified issue policy will not have a medical exam or labs, but there will be medical questions. An applicant will have a health classification. The most common classifications are standard, preferred, preferred plus, and standard plus. Each carrier has different criteria for each. We like to think that we are in good health, but the vast majority of folks are standard. If you use an online quoter and you’re unsure of your classification, use standard.

With a simplified policy application, you will be asked your height and weight. This information can affect rates, but more likely is a determinant of your eligibility. Some carriers are more lenient, but you might find yourself “knocked out” of eligibility.

Other common “knock out” medical questions include terminal illnesses, certain cancers, ALS, some forms of diabetes, and kidney disease.

Although not included in this Top 5 list for rates of a certain type of policy, the type of simplified policy will affect what you pay. The three main types of simplified issue policies are,

1. Level. A level, or “Day 1” policy would pay the death benefit from the day the policy is issued.
2. Graded/Modified. With this category of coverage, in first 2-3 years, the full death benefit would not be paid, but a return of all premiums plus interest would be paid. It is still a good deal because it is like a guaranteed savings plan with interest. Having the modified payout keeps the premium low and after a few years, it acts like any level policy.
3. Guaranteed Issue. This is a type of graded policy where the application questions are very limited and almost anyone can get this type of policy. It is for folks who would not otherwise qualify for another policy. It costs more, but gives an option.

All these policies described are permanent whole life coverage which means the premium never goes up and the death benefit never decreases. For this reason, it most often is the correct solution for seniors.