life insurance rates

What factors determine life insurance rates?
Insurance companies base their premium rates on the amount of risk an insured poses. The greater the risk of an insured filing a claim that the insurance company will have to pay, the more premium the company will charge that individual. When it comes to life insurance, the rate charged by the insurer will depend on how likely you are to die in a given period.

In addition to the amount of coverage you wish to buy, the type of policy you purchase will have the most impact on your insurance premiums. The most affordable life insurance is term insurance. With this type of policy, the insurance company agrees to cover your life for a specified term as long as you pay your premium. The most common terms are 10, 20 and 30 years. The shorter the term, the less you will pay premium.

Two other types of life insurance are whole life and universal life. These types of policies can cover a person for his or her entire life, as long as adequate premiums are paid. They also can generate cash value that policyholders can access. Because of both these features, whole life and universal life are much more costly than term life insurance. What goes into life underwriting To determine the amount of risk of an insured, life insurance underwriters will examine the individual to determine the probability of an applicant’s life lasting up to or beyond average life expectancy or of an applicant passing away before average life expectancy. Age and gender will be the first considerations. Obviously, the younger an applicant is, the more likely they are to live longer than somebody older.
Also, since women have a higher average life expectancy than men, they will typically pay a smaller premium. The next most important factor is a person’s health. Underwriters will take into consideration: Height and weight. Obesity is considered a risk factor that could cause early death. Underwriters have guidelines for what the optimal weight is for men and women of certain heights. The more a person deviates from these guidelines, the more risk they present.

Health conditions. Some health conditions can increase life insurance rates. Many conditions that most people would consider relatively minor may impact insurance rates, including asthma, high blood pressure, and high cholesterol.

If you’ve previously been diagnosed with cancer, heart disease, diabetes, HIV/AIDS, depression and other diseases, you will almost definitely pay higher rates and in some cases be denied coverage. The key to minimizing the impact of these ailments isto demonstrate that you are properly managing your health, taking your medication if applicable, and following a physician’s recommendations. Smoker status.
The effects of tobacco on a person’s life expectancy are well documented.

Life insurance companies use two sets of risk classes to assess premium rates, one for smokers and one for non-smokers. In most cases, if you’ve been a smoker for several years but have quit, you will likely be assigned smoker status. Many insurers will make concessions for people who smoke occasional cigars, however. Alcohol use. Similar to how smoking affects a person’s underwriting, an insurance company will also assess how prevalent alcohol is in an applicant’s life. A history of abuse will indicate possible liver damage, which creates greater risk.

Also, people who drink more than occasionally may present higher risk for alcohol-related accidents. Family history.If there is high incidence of heart disease, cancer, and other diseases in your family, this increases the possibility you will contract them as well. This raises your risk to the insurance company.

The company will also look at how long members of your family have lived to predict your life expectancy. Non-health factors are also considered Beyond current health; underwriters will look for other factors to assess the risk of an applicant, including: Vocation.

Some jobs are more dangerous than others, and that will contribute to how the insurance company underwrites your application. Professions with a high accident and death rates will be especially scrutinized. Examples include mining, firefighting, law enforcement, certain types of construction, fishing, and logging. Driving record.

Many life insurance companies will access Department of Motor Vehicles records to determine how safe a driver you are. Since many pre-mature deaths occur in car accidents, having a poor driving record increases your risk to the insurer. Hobbies. Applicants who participate in high-risk activities will likely pay a higher premium. Examples include flying aircraft, sky diving, rock climbing, racecar driving, and scuba diving,