If you have dependents and a mortgage then life insurance is likely to be essential for your family’s financial security.
But why pay more for life insurance than you have to?
Factors affecting Life Insurance Premiums
Age
It goes without saying that the older you are the more you will pay for your life insurance. This is because the risk of dying increases as you age.
The exception to this is during your 20s when the risks of car accidents and experimentation can cause some insurers to charge more than for a more mature 30-year-old.
Gender
Life insurance premiums for females are generally lower than for males.
This is based on mortality rates which show that females on average live for longer than males in industrialized countries.
Smoker status
Smokers can pay up to double the premiums of non-smokers.
The interesting thing is that you’re you haven’t smoked for the last 12 months most insurers will price you as a non -smoker, implying that the adverse health effects of smoking can be reversed.
Occupation and pastimes
These factors tend to only come into play only if you are involved in extremely hazardous occupations or pastimes.
Examples might be an occupation which involves handling explosives or a pastime of motorbike racing at high speeds. Insurers sometimes offer cover in these cases with premium loadings or with exclusions for certain activities.
Health
If you have a pre-existing medical condition such as diabetes, arthritis or heart disease you can expect your premium to be loaded. This higher premium is to recognize that your risk of dying may be higher than the “standard” person.
Comparing Life Insurance Premiums
Even for the same gender, age, smoker status, occupation, pastime and health, different insurers may offer you different premiums.
Why would this be the case?
Different claims experience
The actuaries of each insurance company use their claims experience to predict future mortality rates. As each insurance company’s experience is slightly different their pricing is likely to reflect this.
Discounts and Incentives
From time to time insurers may want to change the composition of their pool of policy-holders. For example they might want to decrease the number of smokers or increase the number of 30 to 40 year-olds. They will therefore increase or decrease their rates accordingly.
Recently many insurers have rewarded customers for a healthy lifestyle as measured by their BMI (Body Mass Index) or their level of activity.
Underwriting differences
The number of health questions asked by the insurer can affect the pricing. The more questions you answer the more the insurer can be confident of your future health and is likely to charge a lower premium and vice versa.
Similarly insurers which advertise “no medicals or blood tests” or “guaranteed acceptance” are likely to charge higher premiums.
Exclusions
It is normal for life insurance to have an exclusion for suicide or self-inflicted harm.
However some policies include blanket exclusions for all pre-existing conditions, including obesity, and may also exclude automatically some pastimes and overseas travel. You may not be aware of these exclusions until it comes time to claim.
Therefore, if you have been offered a “cheap” policy be sure to check the exclusions.
How to find the best deal on your Life Insurance
Premiums can vary by as much as 100% between insurers.
In the past it was difficult to compare premiums from individual insurance companies. However today there are many online life insurance comparison websites which can be used to compare life insurance.
As always the old adage “it pays to shop around” applies to life insurance policies.
