8 Factors That Can Affect Life Insurance Premiums
We all have the desire to ensure that our loved ones are protected. A recent study conducted within the life insurance industry by groups such as Life Happens and LIMRA, established that 102 million uninsured people across the United States believe that they need to get life insurance coverage or get more life insurance coverage than what they have now. That is nearly half of the entire country’s population. However, the vast majority of these people will put off purchasing life insurance coverage as they believe that it is too expensive. This places their family at risk of financial jeopardy if they happen to die.
If you are curious about life insurance coverage and want to obtain a good deal, and perhaps pay less for coverage, then the following factors should be considered when applying for life insurance.
1) Your Age.
There’s not much we can do about this one unfortunately. We can’t make ourselves any younger.
Age is one of the main factors that contributes towards the cost of life insurance premiums. To put it simply, the older you are, the more that you will have to pay to obtain life insurance. The study conducted by Life Happens and LIMRA also stipulated that almost 40% of insured customers wish that they had purchased their life insurance policies when they were younger.
This is because all things being equal, the younger you are when you buy a life insurance policy the less the policy will cost. Statistically speaking the younger you are, the less likely you are to pass away.
For instance, if you are 50 years old and buy a 20 year level term policy your premium is locked in until you are 70. Compare that to a 60 year old buying the same 20 year level term policy. They would be covered until age 80. There’s a much higher probability of death in your 70’s than in your 60’s. Therefore the premium for a 60 year old be much higher.
Here’s a an example of the cost difference for a $500,000 20 year term policy.
50 year old man non-smoking man in great health – $70 monthly
60 year old man non-smoking main in great health – $201 monthly
The bottom line is that the sooner you lock in coverage the lower the cost will be. Each year you wait to begin a policy the premium increases. Once your policy starts and is in force the premium can be locked in for a set number of years or for life depending on the type of policy you purchase.
2) Your Gender.
Women will pay a much lower premium than their male counterparts as women tend to have a longer life expectancy than men. According to worlddata.info the life expectancy for men in the United State is 74.5 and for woman it’s 80.2. This is great news if you are a woman seeking to obtain an affordable life insurance policy.
Take a look at this…
This is an example of the cost difference for a $500,000 20 year term policy for a man and woman.
55 year old non-smoking man in great health – $113 monthly
55 year old non-smoking woman in great health – $83 monthly
3) Your BMI.
Your height and weight will play a significant role in determining your premium. This is because most life insurance companies will use these specific stats in order to determine your expected life expectancy. Statistically speaking someone with a higher BMI is at more risk to develop health conditions in the future.
Most insurers will use your body mass index or BMI when calculating the cost of your life insurance premiums. BMI is calculated by assessing an individual’s body fat through their height and weight measurements. Someone with a higher BMI poses a greater risk of developing diseases such as heart disease and some forms of cancer. However, calculating a person’s BMI isn’t always the best way to determine an individual’s overall health. An athlete, for instance, may have more muscle mass that increases their weight without putting them at a higher risk of developing health issues.
4) Your Medical History.
Your medical history plays a significant role in determining your cost for coverage. Those who are healthier are far less likely to die while the policy is in place, and thus, they are usually approved for lower insurance rates. On an application for life insurance, the insurance company will ask you questions concerning your medical history and run a prescription drug report to see what medications you have taken in the last several years. You may also be required to take a medical examination, and the insurance company may choose to obtain your medical records depending the the underwriting requirements of the particular product you are applying for.
5) Your Family History.
Your family’s medical history is also considered when calculating your life insurance premiums. Many companies will look at whether either of your parents or both every had cancer or heart disease. They may want to know when they were diagnosed and if they passed away how old were they when they passed.
However, once you’ve reached a certain age the insurance company will ignore your family history. For most companies this is after you’ve turned either 60, 65, or 70. Every insurance company has different underwriting guidelines. If family history is an issue make sure your agent knows ahead of time to help ensure you apply with the company that will look at your application most favorably.
6) Your Tobacco Use.
Regardless of whether you vape, chew tobacco, or smoke cigarettes, you should expect to pay more for life insurance with most companies. If you smoke cigarettes you will get a smoker or tobacco rating with all companies. It doesn’t matter if you smoke 3 packs a day or one cigarettes a day you will get a smoker rating. However, if you smoke cigars, chew tobacco, or use a pipe you can get a non smoker rating with some companies.
The good news if you smoke cigarettes today, is that if you quit for a least one year with most insurance companies you can get a non-smoker rating. If you were thinking about quitting anyway this might be just be the incentive you need to do so. The cost savings can be quite significant.
7) Your Occupation.
Higher-risk jobs are often incredibly heroic occupations. However, they can also be incredibly risky. This is why life insurance can be hard to obtain for those who choose a higher risk career. When these policies are available, they also tend to be far more expensive than they are for those who are in regular occupations. Higher risk occupations could include natural resource work, aviation workers depending on several factors, military members who are in active service, first responders, and miners.
The reason why your occupation can have an impact on your life insurance application is because it has the potential to have an impact on your overall physical health. You may be in a position where you are involved in dangerous situations on a daily basis. Military positions also carry a health risk over a longer period of time. For instance, it’s very unfortunate but many military workers develop mental health conditions post-service that can impact their overall health.
8) Your Lifestyle.
The vast majority of life insurance companies will ask you lifestyle questions in order to ascertain any factors that could impact on your safety and overall health. These factors can include criminal background checks, driving records, drinking habits, and your financial history. If you have a record of taking part in unsafe activities, then this can increase the rate of your premiums.
You should also bear in mind that all of these factors are assessed individually and a single speeding ticket will not exclude you from purchasing life insurance. However, a repetitive history of reckless driving could do so.
Another example on the financial side is if you had a bankruptcy several years ago that would not be a concern with the vast majority of insurance companies. However, if you have several bankruptcy’s or have had one that was very recent that could certainly be an issue.
That’s a Wrap
Again these are 8 actors that can play a significant role in determining what the premium will be that you have to pay for life insurance. As always, your best course of action is talking to a knowledgeable independent agent like myself that can guide you through all this and help you get the best coverage for you.