In last week’s mail, I received my quarterly statement and invoice from my life insurance company. The invoice was twice the amount I paid in August. What was going on?
When it comes to life insurance actuarial tables, calculating one’s age is slightly different from one’s actual age on any given day. If that were the case, I would be forty-nine. To calculate “insurance age” I use the year for which the premium was due and subtract my birth year.
The premium is due for January, 2014. According to my life insurance company, I am now fifty years old.
Many life insurance companies use what is known as “age banded rates” and the amount of premium increases gradually every five to ten years. Turning fifty is an actuarial Rubicon of sorts and my premiums now reflect it. Based on whatever pooling statistics the company used, I’m more likely to die at 50 years old than at 49.
If I die, they pay. If I live, I pay.
I’m being melodramatic today. Every day, I’m reminded that I’ve already lived more years in the past than I’ll live in the future. Whether the insurance company will be there to cover that probability is unknown.
“After all, insurance is just another class of protection that may or may not be worth the paper it is written on when push comes to shove, and as we have seen in the case of Detroit, supposed protections can be ephemeral.” Nicole Foss, The Automatic Earth.