Any 45-year-old male can confidently purchase a life insurance policy. However, it is important to understand that life insurance is different for every individual. Oftentimes, your needs determine the type of life insurance policy you need and the amount of coverage that will suit you best. For instance, a 45-year-old man with young kids might take out a policy that provides enough coverage for their education costs.
A similar man with no spouse or kids might not need a policy, but if they intend to start a family soon then they might want to consider life insurance fitted to those needs. So the needs for a life insurance policy will vary from one individual to the other
Types of Insurance
Life insurance comes in different classifications: one is permanent life insurance and the other one term life insurance.
Permanent Life Insurance
Permanent life insurance simply refers to a policy that provides long-term coverage. This coverage is usually for the rest of the policyholder’s life. Permanent life insurance policies come in different categories as explained below.
Whole life insurance is the most common type of permanent life insurance policy. It is a permanent policy because it provides coverage for the insured individual until they die. So it doesn’t matter at what age you die at, could be 50years or 80years, the policy will pay benefits to your beneficiaries. As long as the premiums are paid, the policy stays in force and the beneficiaries receive the death benefit when you pass on. You might incur costly premium payments but the coverage will also be substantial.
Apart from the coverage amount, the policy also accumulates a savings component also known as the cash value component. This amount can be used in many ways including paying for the premiums, borrowing against the policy, and in some instances, individuals use it for investment. In addition to the cash value account, the policy might also attract dividends that are free of income tax.
Universal life insurance is a permanent policy that often matures after the policyholder turns a certain age, often between 85 years and 121 years. While the age is defined, it basically provides coverage for the rest of your life.
One of the biggest differences between whole life and universal life insurance is that the premiums are flexible. Also, the cash value does not grow based on a fixed rate, rather based on the portfolio of the insurer. The cash value account can also be used to pay the premium amount. It can also be used as the surrender value for your policy when you no longer want to pay for it or be used as loan collateral allowing you to borrow against it.
As the premium payments are used for both the cost of coverage and the cash value component, you get to choose how much you pay as long as it aligns with the set minimum and maximum amounts.
Simplified Issue and Guaranteed Issue
Guaranteed issue, just as the name would suggest is a type of life insurance that does not require a medical exam to qualify. Qualification for a policy once you apply is assured since you don’t have to undergo an underwritten process that might limit you because of your medical condition. Simplified life insurance, on the other hand, does not require the applicant to undergo a medical examination but might be required to fill out a medical questionnaire.
Since both simplified issue and guaranteed issue are easy to qualify for, they carry expensive premiums when compared to other types of permanent life insurance policies. This is because the insurer surmises the risk associated with the insured. These people are automatically assumed to be high-risk individuals. Also, while the premiums charged are very expensive, the coverage is usually low.
You are 45years with a family that financially depends on you. You are worried that in case of your death, your loved ones will be left with a huge financial burden and will need to look for ways to finance your funeral. Final expense life insurance policies are tailored to solve such problems. It is cheaper than most permanent policies and is a great way of ensuring that your loved ones are not left with huge burial bills to worry about when you die.
While a lot of policies limit individuals because of poor health, final expenses life insurance does not. The premiums do not increase and as long as they are paid, the benefit is guaranteed. Also, the death benefit does not reduce unless you decide to borrow against the policy’s cash value.
Term Life Insurance
Term life insurance is temporary and only provides coverage for a specific time span. Oftentimes, the term lengths lie between a period of 5 years and 30years. As such, you can have a term life insurance policy of 5years, 10years, 15years, 20years, 25years, or 30years. Since the length is determined and limited to a specific period, term life policies have cheap premiums.
Another major advantage of taking out such a policy is that your beneficiaries receive a large payout, considering the low amount of premiums paid. It also has income tax benefits and is easy to understand when compared to permanent policies. For example, given that the life expectancy for males is 75.1, a 30-year term life policy would be a good choice for a 45-year-old male.
A major downside of term life insurance is that if the policy owner outlives it then the insurance company does not payout to the beneficiaries. So if you took out a 10-year policy but die a year after that, the death benefits don’t payout. You will have to let the policy expire without a benefit and purchase a new one if there is a need. On the brighter side, some insurers allow you to convert the policy into a permanent one.
The following is a representation of examples of typical rates a 45-year-old male would pay for both term life insurance and permanent life insurance.
Term life insurance monthly rates for a 45-year-old male.
Whole life insurance monthly rates for a 45-year-old male.
How Companies Determine Rates
A lot of people don’t understand the criteria used by insurance companies to determine their rates. If you take out a policy at the same time with a friend or family member from the same insurer, why aren’t the rates the same? You are two different people with different needs. Insurance companies use statistical evidence and mathematical calculations to determine the rates they charge their clients. The main factors used by insurers to determine insurance rates are the following;
Type and Amount of Coverage
There are different types of life insurance policies, all of which have different amounts of premium payments. For instance, a term life policy for a certain amount of coverage will not cost the same as whole life or universal life policy for the same amount. Some policies are cheaper than others based on different components. Also, the more comprehensive your coverage is, the more you will pay for your policy.
You don’t expect to pay the same rates for $200,000 coverage as you would pay for $500,000 coverage. These amounts are different, so will the premium rates be! The more coverage you need the more the premiums you pay, and vice versa.
Apart from the amount and type of life insurance, other personal data is also used to determine the rates you pay for your policy.
Your age is one of the biggest determinants of how much you will pay for your life insurance policy. A young person is less likely to contract diseases and has a higher life expectancy when compared to an older person. Also, they will likely take out a life insurance policy for a longer period than an older person. This way, the premiums are lower than that of someone older than them. The older you are the more premiums you will pay and the less coverage you might qualify for.
Men don’t pay the same life insurance rates as women. Men are considered riskier to insure simply because of most of the careers they dominate and the types of hobbies they are likely to indulge in. This lowers the life expectancy of men which is why they pay higher premium rates for life insurance. Statistics have shown that on average, women live five years longer than men which means they pay premiums for a longer period. This way, they get to enjoy lower premiums.
Next to age and gender, age is a major determinant of the rates for life insurance policies. For most policies, individuals will have to undergo an underwriting process in order to qualify. This is a full medical examination done to assess your medical health and establish your risk level. If you have an underlying medical condition then you might not qualify for some policies, and you will have to pay high premiums for the ones you qualify for.
If you know that you already have a medical problem that might limit you from qualifying for a life insurance policy, you can opt for a no-exam policy. You won’t have to get your health examined but in some instances, you might be required to fill out a medical questionnaire.
Apart from your personal health records, you might also be required to provide additional family healthy history records. You might be healthy but if your family health history has records of certain health conditions such as diabetes then this might also affect your premium rates.
What do you do for a living and what are your hobbies? These are things that make up your lifestyle and that your insurer will use to determine the rates you pay for a policy. If you like passing time car racing, then your risk of insuring is high and you will likely pay very high premiums. Also, if your occupation is shipping then you are also going to pay high premium rates.
Any smoker is considered a red flag by insurance companies. It is considered a high-risk activity which is why rates for non-smokers are lower than those of a smoker. Smoking increases the risks of contracting different ailments, so if you are a smoker and want to take out a life insurance policy then you might want to stop.
Things to Look Out For
Finding a life insurance policy is not very easy at 45 years, but it is not impossible. It might take time to find exactly what you need, but when you already know what you need and what to look out for when browsing different products then it becomes easier. When choosing a life insurance product as a 45-year-old male, here are a few things to look out for.
Getting the Wrong Type of Coverage
A lot of people end up getting the wrong type of coverage because they don’t take their time to understand different products and how they work. Given the two main types of life insurance policies, you need to understand what you want to get out of your policy. Do you need a policy that will help finish up the mortgage payment should you die before it is completed? A term life policy would be the best choice. If your loved ones are financially independent and their finances will not be affected when you die, then you might not need a permanent policy. Instead, you could take out a term life policy that will cover your funeral expenses.
Focusing on the Price
Life insurance is not something you can afford to skimp on. Don’t just reduce your coverage amount in order to pay for lower premiums. You need to establish your needs and understand the effect cutting down the coverage amount will have on your loved ones in the future. While cutting on the costs is an immediate concern, you might want to evaluate your budget and decide what you can cut back on before reducing the coverage amount.
When shopping for a life insurance policy, you need to look for products that are flexible. This could be in terms of premiums, are they flexible to adjust to your needs should your financial situation change in the future? For instance, you are 45 years, and you will want to retire when you are 55 years, will you still be able to afford the premiums you commit to at the beginning of the policy?
Also, is the policy you are interested in renewable in the future? Later, you might decide to include your spouse in the policy. Will the product allow you to do so? Also, even if it does, will the rates remain affordable to you, and will the policy provide enough protection for you?
Before purchasing a life insurance policy, you might want to shop around and find out the different options you have. Life insurance is diverse, and the first option you learn about might not be the best policy for you.
With a lot of products to choose from and even more insurance companies to consider, finding the right policy might not be as easy as it seems. You will spend hours on end on the phone with different insurers discussing the different products they have. It is exhausting!
With CFA Insurance, you get to work with experts who will assess your current financial situation and household needs and help you to choose the best policy. We will work with you every step of the way to ensure that the process is smooth for you.