How Are Life Insurance Premiums Determined?
Everyone knows the importance of having life insurance and not taking risks when it comes to providing for our family. Life insurance companies also know about risks and never take them when it comes to setting the rates you will be charged for a policy. But how are the rates determined? Here is a quick look.
Age
Obviously, age plays a big role in setting life insurance rates. The younger you are the lower the premium you will be asked to pay. But, you will also pay this premium for a longer period. It s a trade off so to speak. But life insurance earlier in life and pay less for it or buy it later and pay more.
Occupation And Hobbies
Many people don t realize that your job or hobbies can greatly affect your life insurance rate. For example, an office worker will pay a lower premium than a truck driver or a construction worker.
Your hobbies may also play a key role in your premium. Someone who enjoys skydiving or rock climbing will pay a higher rate, if they can even get insurance at all.
Smoking
Smoking is another risk factor that influences rates on life insurance. Of course, we all know how bad smoking is to our health and because of the increased likelihood of cancer and premature death, the rates are adjusted accordingly.
Oh, and don t think you can get by with telling the insurance company you don t smoke when you really do. The insurance company can deny paying the death benefit if it is determined you died from a smoking related cause such as lung cancer.
Health Status
Finally, an insurance company relies on your personal health history in determining your rates. A health condition such as obesity, diabetes, high blood pressure, etc., doesn t necessarily mean you are not insurable, but it can mean that you will need to pay a higher premium.
An insurer will also pay for a medical exam that may be required in applying for any life insurance policy.
Keep in mind that if your health improves you will want to let your insurance company know about it. Although an insurance company will never raise your rates on life policies once they are set, they can reduce them if it is determined that your health condition has improved. Most people don t realize this.
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