5 Factors That Affect Life Insurance Premiums

Death is something that comes for us all, no matter your background or status in life. While the idea of leaving this world and your loved ones behind can be daunting, there’s something reassuring in signing up for cheap life insurance while you’re still relatively young and healthy. In the event that you pass away unexpectedly, your loved ones who are left behind can still have their financial needs taken care of. 

In a life insurance policy, there are many factors that determine the cost of the premium. Let’s look into the top 5 factors that can impact it:

  • Kind & Amount of Policy

Many policies offer different levels of coverage, investment options, and payout structures. Term life insurance, the simplest type with a set term of around 30 to 40 years, has the lowest premiums. Whole life policies, on the other hand, have higher premiums because they come with guaranteed death benefits, something you don’t get from term life insurance. Another factor is the amount that will be given to your family upon your demise—that is, the death benefits. A policy with a benefit of $100,000, for instance, will have a lower premium than a million-dollar policy.

  • Age

In the world of insurance, it’s a known fact that the younger you are, the greater your chances of having lower premiums. The reason for this is because insurance is basically a calculated risk. For instance, if you’re a strong and active 20-year old, the greater your chances that you’ll still be alive 30 to 40 years from now. This is why insurance companies generally give younger policyholders less expensive premiums.

  • Gender

Here’s another interesting fact about insurance—men pay higher premiums than women. This is because of the commonly held standard that females generally live longer than their male counterparts, and thus, they have lower risks. But this stereotype alone is not the reason why insurance is more expensive for males. Although not applicable to everyone, men are known to have more dangerous jobs and hobbies. They are also more likely to engage in vices like smoking, drinking, and doing drugs. While it can be said that not every man is an alcoholic construction worker, insurance companies consider average cases and not individual ones when assigning premium rates.

  • Health

Another truth about insurance is that you’ll get lower premiums if you’re healthy and free from any medical conditions. If that is the case and you want to ensure that you get the best rates, you can arrange for a medically underwritten policy. This is where the insurance policy assigns a medical professional to you and makes certain assessments about your health such as your height, weight, vitals, and the general state of your health. Be honest when answering the questions; even when you’re not in the perfect state of health, you can still get a better deal on a medically underwritten policy than a simplified one that doesn’t require medical exams. Also, it would be to your advantage to tell the truth rather than risk having your death benefits denied just because you were lying about something. 

  • Lifestyle

It need not be said that smoking is bad for one’s health—everyone knows this fact at this point. But what not anyone might know is that insurance companies take such a harmful habit so seriously that they offer separate and more exorbitant rates for smokers. Policyholders who have a regular habit of smoking are usually offered premiums that are four times the rates of a non-smoker. If you’re a tobacco user, you might as well quit the habit fast; insurance companies usually consider a person who’s been tobacco-free for a minimum of 12 months as a non-smoker. 

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