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What Would Life Insurance Cost Without Risk?

Another way to approach that question would be to ask just who it is that presents the least risk and how do life insurance companies determine when extra risk is present. The average life expectancy in the US varies from state to state with Mississippi and West Virginia bring up the lower end at around 75, while Hawaii is a full year better than everyone at 82.7. We’ve heard it put other ways, of course with women generally always outliving guys. We’ve heard the average life expectancy is 78 at birth, but if you don’t have any significant health issues by the time you’re 60, then the average goes up to 85.

So, life insurance mortality risk is calculated on ages 0-100 and assumes the average impairments and accidents and suicides per every bazillion people. So, young, still healthy people get the best rates so let’s just run through a whole mess of scenarios and see how much this confuses the issue. We’re going to start at age 20 because life insurance companies rate all juveniles either approved at a standard rate or declined. Age 19 or 20 is the first time young people have access to all the rate classes, preferred plus, preferred and so on. You will get a sense as we go along that it’s apparently a huge advantage to be female and that life insurance companies aren’t shy about pricing life insurance high enough to accommodate those who would ask to be insured beyond their average mortality.

So, given great health and family history, for $250,000 of 30 year term life insurance, a 20 year old male should be able to pay $220 a year. His twin sister would pay $177. 10 years later at age 30 the brother would pay $232 and the sister $200. Note the subtlety of the fact that at age 20 there is a $43 difference between male and female and at age 30 it is $32. Given the scattered nature of male brain cells at age 20 we were a little surprised there wasn’t a larger difference.

Still in great health at age 40 the brother would be $360 a year and sister $295. At age 50, while there is no real magic about the age there are plenty of urban myths about over 50 life insurance, you can see how a 30 year term that guarantees a rate to age 80 kicks in with the brother paying $825 and the sister $627. OK, so we’re looking a the best rate class approvals and even though we have personally placed best class life insurance approvals up to age 82, after age 60 those approvals are a little harder to come by. So in continuing let’s add well controlled type 2 diabetes as a second life insurance quote after the best rate class. These rates will assume diagnosis of diabetes after age 50 and excellent control with an A1c under 6.5 and no other health issues that would push this out of the standard plus rate class, the third best rate.

So if our 60 year old brother is in great health and wants $250,000 of 20 year term he could expect to pay $1287 a year and his sister would pay $887. If they both had diabetes within the guidelines above he would be paying $1997 and she would be at $1385. If they were both in great health but smoked his would be $4185 a year and hers would be $2842 a year. Yow! Life insurance and smoking aren’t happy siblings. What if they didn’t smoke but had a fairly uncomplicated case of Crohn’s disease and want life insurance. His would likely be about $2000 a year and her’s $2047.

But at age 70 we’ll say they don’t smoke and are still in great health. He would pay $4777 a year for $250,000 of 20 year term and she would pay $3075. If they were diabetic as discussed previously his is $6407 and hers is $4100.

If you have any questions or don’t agree with the fact that you didn’t qualify for the best rate class, call or email us. We can help.

 

About the Author

Every year millions are needlessly declined for life insurance or approved and paying far more than they need to. For 14 years, I have specialized in turning those situations around and finding the right life insurance solution at affordable rates. I give every client the personal attention they deserve.

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