David Morey 
Navigating life insurance can seem complicated. It’s important to look at what affects the price of an insurance policy.
These factors vary depending on the different types of life insurance policies. You can’t change some factors like your age. However, improving your overall health can help you to reduce rates.
Let’s cover the factors affecting your life insurance in more detail.
Age
Actuarial tables say that a person’s age affects life insurance premiums. Your expected lifespan also matters. Because of this, insurance companies view younger policyholders as lower risk and offer them the lowest premiums.
For seniors, life insurance companies may limit their insurance options, due to the higher risk of death. Luckily, term life insurance is accessible until age 80 but with shorter term lengths.
Gender
Insurers use gender to calculate life insurance prices. Females generally get lower premiums than males due to their longer life expectancy.
Health Condition
A person’s overall health affects life insurance premiums. Some medical conditions increase the chance of a policy payout. Insurers assess this risk by conducting a medical exam. They also review medical records (with consent) and access pharmaceutical databases.
Any existing health issue you have can affect your life insurance premiums. This includes high blood pressure, high cholesterol, diabetes, sleep apnea, anxiety, or depression.
Insurers consider various health factors, such as:
Medical history: Including past and current conditions, treatments, and medications
Anthropometric data: Including height, weight, and body mass index
Risky behaviors Like smoking, alcohol consumption, and drug use
Family medical history: Including heart disease and cancer among immediate relatives.
Family Medical History
Be prepared to discuss your family’s medical history since this can affect your rates. Insurers care a lot about the health of your close relatives. This includes your parents and siblings. Here are some medical conditions they may look for:
– Malignant neoplasms, including breast, colon, prostate, pancreatic, and other forms of cancer
– Melanoma: a type of skin cancer
– Cardiovascular disease: especially if you are a smoker
– Congenital heart disease: a condition present at birth
This information lets insurers assess your risk. They use it to adjust your life insurance rates.
Smoking Habits
Smoking, in any form, affects your life insurance premiums. This broad classification extends to many nicotine delivery methods. It includes smokeless tobacco, pipes, chewing tobacco, patches, gum, e-cigarettes, and vaping devices.
Insurance companies vary in their rating structures. Some consider how often a person uses nicotine. However, healthy individuals who have optimal blood pressure, weight, and cholesterol levels may be eligible for better rates.
In addition, insurance companies may classify marijuana users as non-smokers.
Lifestyle Factors
When applying for life insurance, the company will ask about your job and hobbies. These factors can affect your insurance rates. Insurers consider certain professions and hobbies as high-risk, resulting in higher premiums.
- These include hazardous jobs. Those that involve heavy manual labor, exposure to toxic substances, or high-risk environments.
- Adventurous pursuits, like scuba diving, skydiving, and piloting planes, are risky. They have a higher likelihood of accidents or injuries.
Driving History
Your driving record affects insurance rates. This is especially true if you have a history of dangerous driving habits. Insurers consider certain driving infractions, such as:
– Drunk driving convictions (DUI)
– Reckless driving convictions
– Suspended or revoked licenses
If you have any of these on your record the past three to five years, insurers may see you as a higher-risk driver. This will lead to higher life insurance premiums.
Criminal Record
A criminal history can make or break your premium rates. A felony conviction requires a decade-long wait. A DUI conviction requires a five-year wait. Then, one can qualify for an underwritten policy.
Life insurance companies will likely deny people in the criminal justice system coverage. This includes those awaiting trial in prison, on probation, or parole. Furthermore, authorities will also deny individuals with many severe criminal convictions.
Financial Problems
Life insurance providers often scrutinize an applicant’s financial history. They look at bankruptcies when assessing eligibility for coverage. If someone declared bankruptcy in the past few years, insurers reject their application.
The specific timeframe varies among insurance companies. This shows the importance of working with an experienced life insurance broker.
Also, credit history can impact life insurance rates. It is part of some risk scores used by insurers. The scores help insurers test an applicant’s risk level. They also help set premium rates.
Amount and Length of Coverage
The policy type and coverage amount selected matter as well. Term life insurance is usually the cheapest option. Universal life insurance is pricier. Whole life insurance is usually the most expensive choice.
Besides, policyholders can choose life insurance riders. These are extra features meant to address specific coverage needs. For instance, a “waiver of premium” rider lets individuals stop paying premiums. They can do this if they become disabled. It helps them keep the policy active.
These riders can help bridge coverage gaps and provide added financial security. By considering the policy type and coverage amount, people can make informed decisions.
Common Types of Life Insurance Policies
The specific type of life insurance policy chosen impacts the associated rates. Term life insurance is the cheapest option. It provides coverage for a set period (usually 5-30 years). It has fixed premiums and no cash value. This option is great for people seeking coverage for a specific debt or time frame. For example, it can cover income replacement until retirement.
Whole Life Insurance
Whole life insurance provides permanent coverage. It also has a guaranteed cash value. This type of policy has a fixed premium, death benefit, and a modest rate of return. The return is usually around 3% on the cash value. Whole life insurance is for those desiring lifelong coverage. They are willing to pay for the guarantees it provides. But, it tends to be more expensive.
Universal Life Insurance
Universal life insurance is another permanent coverage option. It has a cash value component. It offers flexible premium payments and death benefits within certain limits. But, you must understand what guarantees and what does not. Cash value gains are not always guaranteed.
Variable Life Insurance
Variable life insurance is also called variable universal life insurance. It provides permanent coverage with a cash value. This lets policyholders invest in various sub-accounts. This option is for those who want to take an active role in their life insurance. But there’s a risk of losing money on the death benefit and cash value. This can happen if investments don’t do well. Plus, policy fees can be high.
Medical Exam vs. No Medical Exam Policies
Some life insurance providers offer no-exam policies. Multiple types of life insurance policies drop the need for a medical examination. These policies are available for both term life and permanent coverage. Yet, it’s important to note that insurers may still get health data from third parties.
No-Exam Life Insurance Options Include
Instant Life Insurance offers accelerated underwriting. It uses technology to give rapid approvals. They often come in seconds. Only young and healthy individuals qualify for this type of coverage.
This policy requires answering a few health questions. But you do not need a medical exam. Insurers may still gather information from third parties. It may be more expensive than traditional policies. This is true for those in average health or better.
Guaranteed Issue Life Insurance is another option that lets the applicant skip a medical exam. It guarantees approval with no health questions asked. These policies are expensive. They are for people with major health issues who want a small amount of coverage for final expenses. If you have minor health issues, you should avoid guaranteed issue life insurance.
Is Being Honest Important With The Insurer?
When applying for life insurance, it’s important to provide accurate information. Lying on your application can have severe consequences. It can lead to the denial of death benefits to beneficiaries. The life insurance company relies on the truthfulness of the application.
What Happens If I Lied About Smoking?
If you lie about smoking, an insurance company may refuse to pay your death benefit claim. Smokers face higher premiums. This is because they have an increased risk, like people with heart problems. If you start smoking after purchasing life insurance, your rates will not increase.
What Are The Sources Insurance Companies Have For Gathering Information?
Life insurance companies aim to assess death risk. To do this, they gather data from many sources, including:
– Life insurance applications
– Medical records from healthcare providers
– Prescription drug history
– Driving records
– Third-party sources like the MIB Group
What’s The Ideal Way Of Buying Life Insurance Policies?
To buy life insurance, follow these steps:
1. Determine the coverage amount and policy type (term life or universal life).
2. Get quotes from many insurance companies.
3. Compare costs, coverage features, and the company’s financial strength rating.
