7 Factors That Affect Life Insurance Premium Calculation

Life insurance aims to protect your family’s financial future so that they don’t experience financial hardship when you pass away. Additionally, no federal income taxes are charged on the death benefit. However, a Forbes Advisor study found that most policyholders were unaware of factors that are taken into account by insurers when determining a person’s life insurance quotation.

In this blog we outline the questions insurers ask before determining premiums.

  1. Age

    One of the main factors that affect the cost of life insurance is age. Simply put, the cost of your life insurance will increase as you become older. Therefore, if you buy insurance when you are young, you will pay less in premiums. On the other hand, if you wait until you are older, the risk to the insurance company is higher and the policy term is shorter.

  2. Gender

    Women often live longer than men and are less likely to file insurance claims. As a result, premiums for females meeting the identical conditions are slightly lower than those for males.

  3. Health

    The insurer will require you to undergo medical testing, which is often part of the underwriting process. During the examination, your height, weight, blood pressure, cholesterol, and other important statistics are recorded. Try to live a healthy lifestyle and quit habits that could pose a health risk to get favorable rates on your policy.

  4. Family health history

    An insurer will investigate whether you or any family member has any hereditary illnesses before approving a premium amount for your life insurance policy. This is because insurance companies use the medical history of a family member with health concerns as a prediction of your future health. The premium amounts are calculated based on the risk you represent.

  5. Smoking

    Smoking has an adverse effect on a person’s health, cutting short their lifetime. Thus the insurer may charge higher premiums if you are a smoker. However, if you smoke when you get an insurance policy but decide to stop later, your insurer might let you use non-smoker rates.

  6. Lifestyle

    You will have to pay higher life insurance premiums if your hobbies include high-risk pursuits like racing and skydiving to cover the additional risk assumed by the insurer. Costs may also rise if you work in a field with a lot of occupational hazards.

  7. Work

    Jobs that are deemed to be riskier, such as those in shipping, industry, mining, and fishing, attract higher life insurance premiums than jobs in offices, where the working environment is generally safe.

It is advisable to become familiar with the various types of life insurance and the variables influencing premium costs. Speak to an experienced insurance agent to learn which life insurance would suit your unique needs and budget.

Count on Reardon Agency to cover your family in your absence

Navigating the life insurance landscape can be intimidating. Our agents at Reardon Agency constantly monitor the life insurance industry’s changing climate to understand it better. Contact us today to learn how we can tailor your life insurance to meet your specific needs.

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