April 30, 2021
Agency
Factors that Influence Life Insurance Prices
Factors that Influence Life Insurance Prices
When you buy life insurance, you’ll have to pay a premium for it. However, everyone’s premiums are going to be different, even if two people have near-identical policies.
A variety of risk factors will influence your life insurance premium, from the type of policy you buy to different lifestyle factors. Let’s take a closer look at how these different pieces of data might drive your rates up or down.
The Policy You Choose Determines Your Rates
You want your life insurance policy to provide a settlement to your loved ones when you pass away. Because everyone’s financial goals for their policy are different, there are many policy options on the market. Depending on the coverage you select, your premium will vary.
Life insurance policies generally come as either term policies or whole life policies. Term policies last only a certain number of years, while whole life policies last indefinitely. As a result, the indefinite nature of whole life policies generally make them the more expensive. After all, a term policy might expire long before you will die, while your whole life plan will last the rest of your life.
Furthermore, the death benefit of your policy will impact your rates. For example, some people might find a $100,000 settlement more to their liking. Others will need upwards of $500,000. The latter will be more expensive. If you choose more coverage, after all, you’ll have to pay more.
Other Factors Influencing Your Rates
Along with the terms of your policy, other risk factors can influence your premiums. These factors are those that might indicate what your risk of death is, and if it is a higher one, then you might pay more for coverage.
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Age: Because age links to the risk of death, your insurer will consider it. Older individuals almost always pay more for their coverage. To lower this risk, consider getting life insurance while you still are young.
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Medical history: Those with complicated health often have relatively higher death risks. Thus, they might not be able to buy some policies. They might also pay more for coverage. However, health is not always a limiting factor in your qualifications for coverage.
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Smoking history: Smoking and tobacco use create significant health risks. You will likely pay more for coverage if you have this habit.
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Lifestyle: Some insurers will ask about risks in your personal life. These might include hazards arising through your hobbies, or from your work. For example, someone who works on an oil rig might face higher safety risks and higher insurance costs.
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Gender: Men and women face different lifestyle risks. Therefore, most life insurers will consider your gender when setting rates.
The most important thing to remember is that your life insurance risk profile is different from anyone else’s. Let your agent help you both analyze your personal risks and direct you towards the policy that is going to give you the best return
Tags: Life Insurance