I often meet clients who ask me why their life insurance premiums are higher than that of their friends or family members. In reality there are several factors that play into the determination of the premium rates of each individual life insured. Below are the five major factors that impact your life insurance premiums.
Age:
The first consideration is age obviously. The older you are, the shorter the time you are expected to live, therefore premiums collected must be higher to compensate for the fact that the company expects to collect fewer premiums from you in the long run and pay out to your beneficiary much sooner.
Gender:
This may not be quite as obvious a reason for premium disparity but the fact remains that the [intlink id=”403″ type=”post”]mortality[/intlink] (death rates) of males is higher than that of females. According to every actuary worth his or her weight in gold, men in general will die before women. For this reason males pay a higher premium on life insurance than females. The gender disparity carries the same logic as the age factor. If males will die sooner then we know we will have to pay out on male lives insured in a shorter span of time, therefore premiums must be higher to compensate for that.
Smoker Status:
There was a time long long ago when it didn’t matter if you smoked or not, premiums where the same either way. However, with statistical information proving that non-smokers live longer than smokers many insurance companies began offering preferred rates to the non-smoker class. What constitutes a non-smoker you ask? In insurance terms, non-smoker classification can be used if you have not used tobacco products in the previous 12 months.
If an applicant smoked at the time of application but has now been smoke free for 12 months, they can submit a change declaration to the insurer to have their status changed to non-smoker. Assuming the insurer approves the change, even if the life insured resumes their smoking habit, they will remain insured as non-smokers. The general belief is that he or she is less likely to resume smoking after stopping for a year.
Occupation:
Believe it or not, the job you do can affect your premium rates. If you compare a coal miner to an accountant, the coal miner would likely have a [intlink id=”403″ type=”post”]rated policy[/intlink] based on hazardous occupation resulting in higher premiums than his counterpart in the accounting department. The combination of working underground (Inside the earth) as well as breathing in damaging coal dust leads the coal miner to being more likely to die sooner than someone working in an office. As a result, higher premiums must be collected.
Activities:
Like with all previous four factors, the more likely and sooner you are to die the more likely the policy will be rated resulting in higher premiums. One of the most common example of an activity that may trigger an increase in premiums is skydiving. While many skydivers enjoy skydiving safely and may never experience a close call, compared to someone who does not engage in skydiving, a skydiver’s risk of premature death is vastly higher. The skydiver’s policy takes into account the increase in risk which results in higher than standard premiums.
The reality is that most people who apply for life insurance get approved at [intlink id=”403″ type=”post”]standard rates[/intlink]. Only 1 – 2% of applications get declined. If you are interested in finding out more about purchasing life insurance, reach out to me directly and I will guide you through the process of choosing the best policy for your needs.