From peace of mind for yourself to ensuring your loved ones
have the financial means to handle your final expenses, the importance of life
insurance should be easy to see. Unfortunately, many people struggle with the
cost of premiums even though they realize life insurance is so important.
Understanding how the price of premiums is factored can be
helpful. This guide will explain the key factors that determine the cost of
your life insurance premiums.
1. Age
Age is one of the most dominant factors underwriters
consider when pricing a life insurance premium. A younger individual will pay
less for the same type of life insurance than an older individual.
The theory to why younger people pay less for insurance
stems from the belief that younger people will live longer, so the insurer will
be less likely to have to pay out a death benefit for a younger person.
Because age is such an important factor, experts believe it
is best to purchase life insurance when you are younger.
2. Policy Type
The type of life insurance you purchase is also a factor
when determining premium costs. Term and whole life policies are the most
common. There are not only differences in the benefits of these policies but
also the costs.
As the name suggests, term life insurance insures you for a
specific term. Once the term ends, you will either need to renew for a new term
or convert it to a whole life policy.
Whole life policies have a lot of benefits including fixed
premiums that will never increase even though you age each year. Whole life
policies also accumulate cash value over time. This cash value can be used for
a variety of expenses. Unfortunately, because of the benefits, whole life
policies will be more expensive.
3. Health
No matter your age or what policy type you choose, your
underlying health can also affect the premium rates. Certain medical conditions
are red flags for insurers and underwriters because they feel they increase
your risk of death, making you less appealing and more risky to insure.
Here are a few common medical conditions that can lead to
higher life insurance premiums:
- High blood pressure
- Type 2 diabetes
- Sleep apnea
- Heart disease
- Asthma
- Cancer
- Obesity
- Organ transplants
- High cholesterol
- Mental health disorders
If you are living with or there is a family history of one
or more of the above medical conditions, you will most likely pay higher premiums
for your life insurance. However, having this life insurance will be even more
important because your health and your life are at risk.
4. Occupation and Hobbies
Most people are surprised to learn certain occupations and
hobbies can make them riskier to insure.
Roofers, tree specialist, utility workers, and pilots will
pay higher life insurance premiums because they work at high heights, which can
be dangerous and life-threatening.
Professionals who work in emergency services, such as
policeman, paramedics, and firefighters will also pay higher life insurance
premiums because of the dangers associated with their jobs.
Underground or underwater workers, such as divers, drillers,
and miners, also have hazardous jobs, which can lead to higher life insurance
premiums.
Your premiums will be higher if you have dangerous hobbies,
as well. Skydiving, bungee jumping, mountain climbing, scuba diving, race-car
driving, and flying are hobbies insurance companies consider risky.
5. Death Benefit
Finally, the death benefit amount is a key factor in
determining the rates of your life insurance policy. The higher the death
benefit, the higher your insurance premiums will be.
Many people make the mistake of choosing the lowest death
benefit possible to ensure their monthly premiums are not too high.
Unfortunately, focusing on the premium amount instead of the death benefit
amount could mean you are not leaving your loved ones enough to cover the cost
of your funeral, burial, or cremation and your other final expenses.
For
assistance purchasing life insurance, contact Harr
& Associates Insurance, Inc.,
today.
