Life insurance premiums are based on your health risk for insurance providers. They also vary by each life insurance company’s underwriting guidelines.
Your age and health have the greatest impact on term life insurance policy premiums. But those are just two of many factors that play a role in the underwriting process. Insurers look at everything from your family health history to whether you smoke, have risky hobbies (skydiving) or work in a dangerous profession.
Here are the most important things life insurance companies consider when determining your level of risk and, therefore, your policy premiums:
Age. Your age has a significant impact on your term life insurance rates. All other factors being equal, a 30-year-old will pay less than a 40-year-old for the same policy because the 30-year-old is more likely to outlive the policy’s term. Even if you don’t need a life insurance policy currently, it may be worthwhile to lock in lower premiums if you know you want a policy in the future.
Medical history. Providers will want to know about your health to gauge your risk of dying before your policy’s term is up. They’ll consider things like chronic medical conditions and any issues with your respiratory system, cholesterol level and blood pressure. When you apply for a policy, you’ll need to answer questions about your health and possibly take a medical exam. Your answers will put you in a health classification that indicates your risk level and determines your premiums.
Smoking status. Tobacco use, whether it’s smoking, vaping or chewing, has well-documented health consequences, and insurers put smokers in a higher risk category. If you use tobacco or cannabis, expect to pay twice as much as non-smokers for an equivalent policy. However, your rates can improve if you quit smoking. Most providers have a one-year waiting period to qualify for non-smoker rates after you quit.
Gender. Women have a longer life expectancy than men. This makes women a lower risk to life insurers and that gets reflected in policy premiums.
Family history. Hereditary conditions in your immediate family increase your personal risk as well. Insurers look for potentially genetic issues like heart disease, cancer, diabetes and dependence on toxic substances, and they charge higher rates if your family’s health history isn’t clean.
Occupation. Do you work in a high-rise office building or clean its windows strapped to nothing but a harness? Inherently dangerous occupations like car racing, firefighting, law enforcement and construction will result in higher premiums because of the increased risk of injury or death on a regular basis.
Lifestyle and hobbies. Outside of work, your hobbies play a role in the underwriting process. Regularly participating in dangerous activities like scuba diving or rock climbing will likely increase your rates. Other aspects of your lifestyle that play a role include your driving record, criminal background history, foreign travel and any other factors that can affect your health or physical safety.
Policy details. The more life insurance coverage you buy, the more expensive it is. This applies to aspects of your policy like the coverage amount, term length and whether you purchase additional coverage in the form of riders.
