How does the Premium for a 1-Year Term policy get calculated?

The premium for a 1-Year Term policy is primarily influenced by the insured's age at the time of purchase. This is because age is a critical factor used by insurance companies to assess risk. Generally, younger individuals tend to pose a lower risk to insurers when compared to older individuals, who may have a higher likelihood of health issues or mortality. Consequently, as a person ages, the cost of their term life insurance typically increases.

While insurance companies do set base rates, these rates are adjusted based on the individual characteristics of the policyholder, with age being one of the most significant factors. This means that the premium is not merely a flat rate applied to everyone or a fixed rate determined without consideration of individual circumstances, nor is it calculated without regard to health status. Instead, it reflects a more personalized assessment of risk based on age.