Death is a part of life. While you can take your time and defer taking out a life insurance now, this could change when you have other people depending on you financially. When the time comes to buy a life insurance policy, how much in premiums will you be paying?
Your life insurance premiums are a product of numerous factors looked into by insurance companies. Here are the factors that will determine whether you’ll pay a higher or lower insurance premium as owner and insured person, which we shall define below.Let us help you find an insurance specialist.
Policy Owner vs Insured Person vs Beneficiary
When you buy a life insurance or any other policy for that matter, you are the policy owner. In most cases, the policy owner is also the insured person who is covered by the insurance policy.
In case of your death as the insured person, the insurer will provide a payout in the form of a lump sum or an annuity to your beneficiaries.
These beneficiaries can be your parents, spouse, or children as you designate them. You can also name a lender or a bank as your beneficiary with the policy serving as collateral to the loan. But this setup can be complicated and requires further examination.
It is possible to take an insurance policy for another person’s life, your spouse for example. But you need to have an insurable interest in the person, that his/her untimely demise will result in an economic loss from your end.
Otherwise, you must pass insurability before you can be given an insurance policy. This is basically your level of being insurable, whether the insurer can take the risk of insuring your life in exchange for a premium.
Mortality and Death
Not everyone is insurable although insurers vary as what is insurable to one may be deemed uninsurable to the other. If a carrier however insures someone with high-risk factors, the premium is often higher than standard.
Insurers don’t want someone whose lifestyle or health puts them at risk of death which triggers the benefit payout before the policy accumulates value.
Factors Affecting Life Insurance Premiums
Against this backdrop, here are the main factors that insurance carriers look into when they calculate a person’s insurance premiums. These factors can essentially help out in determining whether your premium is going to be higher or lower.Shop and compare insurance quotes here.
Your age. Age definitely matters in insurance policies. The higher this number, the higher your premium will be. Why? While death can happen to anyone, those who are older are thought to be the first to go.
When you are relatively younger, you can continue paying your insurance policy for a number of years until it can be adequately funded for a payout. This explains why the younger you are, the lower your premium is.
This also explains why some insurance companies don’t accept anyone at the age of 65 and older.
Your gender. Women generally outlive men by almost five years according to the Centers for Disease Control and Prevention
For a comparable policy, a woman will likely pay less in insurance premiums than a man for this reason.
Your medical history (personal and family). It’s a practice for underwriters to pull your medical records for hospitalization, health conditions and more.
Their probe can extend to your family as some life-threatening diseases can be genetic, such as cancer, diabetes, and cardiovascular ailments.
Insurers would be on the lookout for anything that could shorten your lifespan and their existence thus increases your premium.
Notably, smoking and drinking are a big insurance factor. They pose risk to your health and command higher premiums in return.
Your current physical condition. Your Body Mass Index (BMI) is the ratio of your weight and your height, used to screen a person’s physical condition.
If your BMI is within the normal range set by the insurer, your premiums could be low. If your BMI strays from the norm, it could indicate future health problems which drive your premiums higher.
Your driving history. How careful you are as a driver could affect your life insurance premiums as well. Insurers can have access to your driving records in the last three to five years.
Violations can be taken into consideration and reflected on your premium.
Your occupation and lifestyle. What do you do for a living? Does it entail putting your life on the line? How about your after-work activities?
If you are literally living on the edge, you could be in for a higher insurance than most people with desk jobs and engaged in far from risky sports activities.
Your policy. The benefits, the riders, and the term itself are just some of the details of the policy that make it expensive or cost-effective.
The insurer’s rates and costs such as admin and sales expense are also included in the computation of insurance premiums.Learn about insurance essentials here.