Understand how life insurance premium is calculated is not easy. There are many factors that go into calculating the premium. The insurance company will estimate the risk you pose for the company. The risks that insurance companies fear are those that could cause you to die early. They want to take precautions to ensure that you won’t die prematurely, causing them to pay out a lot more than you paid in. To estimate the risk, the insurance company will consider your life style. The insurance company will scrutinize whether you suffer from any major ailments and try to check your smoking habits, cholesterol levels, obesity, diabetes, and other conditions. They also look into age, gender and health.
Higher-risk lifestyles mean bigger premiums because you’re more likely to end up making a claim. Existing medical conditions that are likely to aggravate or get worse in the future can also increase the premium. Tobacco and alcohol use, being overweight, high cholesterol, and poor health are other concerns. If you have a high risk or a hazardous job like a deep sea diver or a high risk hobby like free falling, your premium will be higher. Your family medical history may also be a factor—if your family has a history of life-threatening disease such as cancer or heart disease you may have to pay a higher premium.
Most of us are aware that physical health is a risk factor. However insurance companies also consider the mental health of the person before determining the premium. Those with certain types of mental illness such as depression are at higher risk of committing suicide, and therefore insurance premiums are likely to be higher for such individuals. Many insurance companies review the driving records of those who apply for insurance, and speeding tickets or other citations can mean increased premiums.
There are some factors which influence the calculation of premium but are beyond your control – your gender and your age. If you are buying life insurance at an older age, your premium will be higher. It is always best to buy life insurance at a young age. Young people pay lower premiums because they’re more likely to continue paying insurance for many years before they die. Women generally live longer than men and so they are charged lesser premium.
You will be required to undergo a through medical examination when you apply for life insurance. This will include checking your weight and blood pressure as well as testing blood and urine for signs of disease as well as for the presence of nicotine, illegal drugs and certain prescription medicines. Never lie about your health. It will be very difficult to beat the medical examination.
There is no mystery to the process of calculating premiums. It involves sound logic based on how much risk is involved in taking you on as a customer.
