Factors Determining Your Life Insurance Premium
Have you ever wondered why your life insurance premium is not the same with your friend? Life insurance is not calculated arbitrarily. There are some mathematical and statistical calculations that are carried out before how much life insurance premium you will be asked to pay is arrived at. It requires the inputs from insurance professionals such as underwriters and statisticians. Among the factors they usually consider in determining life insurance premium individuals will pay will be explained below. Why do you need to know about them? It will guide you on life insurance premium to expect and what you can do to lower your premium.
Factors Affecting Life Insurance Premium
- Age: Your age is essentially one of the most important factors every insurance company will consider to determine your life insurance premium or whether your life insurance will be accepted at all. A lot of people have this misconception about life insurance. They think that life insurance is for aged people. This is absolutely incorrect. In fact, people are encouraged to enroll in life insurance as early as possible. If you want to pay cheap life insurance policy, you can easily get this when you are still young. The older you become, the more you become exposed to chronic sicknesses and diseases. Older people are more likely to die soon thereby the need to file a claim.
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- Smoking Habit: If you are a smoker, there is tendency that you will be charged high life insurance premium. Nobody is penalizing you for smoking. The problem is not with the smoking itself but the resultant effects of smoking on your health. There is a slogan that smokers are liable to die young. You understand that the death of the insured automatically translates to the filing of claims by the beneficiaries.
- Lifestyle: Apart from smoking, there are other lifestyles that impact the amount of life insurance premium that you will be asked to pay. If you engage in risky activities such as racing, skiing partying, drinking of alcohol and reckless driving, this will increase your risk exposure. This will translate to higher life insurance premium.
- Occupation: Whether you accept it or not, there is correlation between your profession and the kind of life you live and the impact it has on how long you live. There are certain occupations that are risky in nature. Examples are mining, shipping, piloting and oil drilling etc. The risk of accidental death in these professions is higher than teaching jobs. So, if your profession is among those that insurance companies considered risky, you should expect your life insurance premium to be high.
- Gender: What has gender got to do with the life insurance premium you are to pay again? It is all about the life expectancy. Based on recent study conducted by the World Health Organization, there are about five-year difference between the life expectancy of women and men in USA. Even in other countries, the life expectancy for women is generally higher than that of men. However, it may not be up to five-year difference, the trend is the same.
- Physique: If your weight to height ratio is outside the ideal range, you may need to pay higher life insurance premium. For example, those people who are obsessed will likely pay higher life insurance premium for their policy than someone with a moderate weight to height ratio.
- Medical history: Your insurer will be interested in your medical history. If you have history of hospital admissions, surgery or other health conditions, you need to let your insurer know about this. Even though, any reported health condition will result in higher life insurance premium, you are still expected to tell the truth. Failure to tell the truth may result in the cancellation of your life insurance policy or the claims will be denied.
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- Family medical history: There are some sicknesses and diseases that are hereditary. They follow through a particular lineage. Such sicknesses and diseases include diabetes, strokes and heart attacks etc. If your parents, grandparents, brothers or sisters had any of these sicknesses and diseases, it is likely that you will have them too. That is why insurance companies will not limit their assessment to just your personal medical history.
- Your life insurance policy: The type, term and the value of the life insurance you buy will determine the life insurance premium you will pay. If you are buying term life insurance for just a short time period, your life insurance policy may not be that high.