Insurance Talk

Understanding Life Insurance Rates

You have finally decided that you need life insurance; it is a worthwhile investment and your loved ones will appreciate its benefits. Once you begin shopping for the best policy you will notice that the cost of premiums vary right across the board. Yes premiums will vary depending on whether the policy is for whole life or term life insurance but even within these categories the prices differ. How will you know which one is right for you? The difference in prices will have you wondering what companies consider when fixing premiums.  

Firstly, the rate is determined by the length and value of your policy. If you select a policy for 30 years with a cash value of $100,000.00 the premium will be significantly lower than had you chosen the same cash value but for a term of 15 years.

Life insurance rates are also determined by risk analysis, meaning whether the policy holder falls within a standard class or a preferred class. Your age, health, weight, life expectancy, family’s medical history, gender and lifestyle are all used to determine which class an insurance company places you in and consequently what rates you will pay.

Age and life expectancy are determinants because they help the company analyse how many years of premium you will have to pay before they can viably pay you the death benefit you desire. Health, weight and life expectancy are also used to predict the likelihood of you dying during the term of your policy and how many years into the policy. Similarly, gender helps in weighing the risk because women tend to live longer than men and as a result, pay their insurance rates are lower.

If your family has a long history of serious illnesses which may be hereditary then you may find yourself paying higher insurance rates. This is because from a scientific perspective, you are genetically predisposed to being diagnosed with the same illnesses and dying from them. This makes you a bigger risk for insurance companies.

If your lifestyle puts you at risk of death you will also have higher life insurance rates. This is very evident in a comparison of rates offered to smokers and non-smokers. People with nicotine habits or other drug addictions are bound to end up paying more for coverage. Insurance companies also look at your driving record. The more traffic violations you have, especially drinking under the influence charges, the higher the risk that you may die in a motor vehicle accident.

Even with all these factors taken into consideration, when you look at life insurance rates online, there will still be some variety in prices amongst companies. The best advice is to shop around and even seek the advice of a professional when looking for life insurance coverage.