Let’s face it; life is unpredictable and no one knows exactly what the future holds. Although we can’t keep certain unfortunate circumstances from happening, we can ensure our loved ones are protected through such situations. The greatest gift you could ever give the people you love is the assurance that, even in your absence, they will still be okay. This is where life insurance premiums comes in.
As with anything, you need to pay something to get life insurance cover. Known as premiums, this is a specified sum of money remitted regularly to a provider to keep your policy active. Insurance companies come up with premiums on a case-by-case basis, meaning everyone’s figure is unique. For example, you can take a look at these Caspian Insurance products to see how this works firsthand.
In this article, we explore six factors that play a role in calculating the premium you pay for your life insurance.
How old are you?
A little ageist we know, but when it comes to life insurance, this is a crucial factor. It’s perhaps the biggest determining factor for the premiums you pay. The older you get, the more of a risk you are to the insurer; that is, there are higher chances of them paying out a claim for a 60-year-old than a 29-year-old. For that reason, older applicants usually pay higher premiums.
On the other hand, younger people tend to have fewer medical conditions and are healthier overall, and this means they aren’t likely to warrant a payout any time soon. As a result, insurers charge them lower insurance premiums.
This explains why many financial advisors recommend getting a life insurance policy when one is still young.
What do you do for a living?
As we’ve already mentioned, calculating insurance premiums is a game of risk assessment. Insurance companies will consider your job as an indicator of how much of a liability you could be.
For example, if you’re a boxer, a rally car driver or a firefighter, you’re likely to pay higher insurance premiums than someone who works as a copywriter in a newsroom.
Many insurance companies will also consider your hobbies when pricing your premiums. Do you like to go skiing or are you more content staying inside and painting? Do you like to place your life in constant danger to achieve an adrenaline boost, or do you lead a fairly normal life? Your insurer takes this into consideration when calculating your overall costs.
What’s your health like?
Insurance companies will also consider your health history while trying to figure out how to price your life insurance premiums. If you live with chronic conditions such as diabetes, asthma or cancer, you may pay higher premiums than other people your age who don’t have any chronic conditions.
Your family health history may also come into play when calculating insurance premiums. Insurers will want to know if you’re genetically predisposed to any illnesses.
On your part, try to stay on track with your health especially as you grow older. Go for regular checkups, and do your best to maintain a healthy lifestyle.
What payment plan would you like?
Many people don’t know they can choose from a variety of payment options when getting life insurance. Monthly premiums are the most common insurance payment plan, but it sure isn’t the only one.
When getting life insurance, most providers offer at least three payment plans to choose from. These are regular premium payment plans, single premium payment plans, and limited premium payment plans.
When you go with the regular premium payment plan, premiums are paid periodically, say every month. The single payment plan requires you to pay the premium in one lump sum. Finally, under the limited premium payment plan, the entire policy’s worth is paid for in installments over a short course of time for benefits one will enjoy long term.
Do you drink or smoke – or both? Your lifestyle is an important factor that insurance companies will consider when reviewing your application. Habits such as smoking and drinking are directly linked to illnesses and eventual loss of life.
According to stats, smokers pass away approximately 10 years earlier than non-smokers. On the other hand, approximately 3 million people from around the world die each year from excessive alcohol use.
If you partake in them, the insurer is likely to ask you to pay higher premiums since you pose higher risk.
Are you a good driver?
This is one question that many people don’t expect to come up when they’re seeking life insurance. The truth is, insurance companies analyze your driving records when you’re seeking both auto insurance and life insurance. They look through your records searching for any history of speeding, running red lights, driving under the influence and more.
All these factors point to the kind of customer you’d be, and help price your insurance premiums. This is why it’s essential to maintain a stellar record by following all traffic rules, never driving while impaired, and driving at safe speeds.
It’s a good time to get life insurance
Whether you are a young professional straight out of college, a new mum or dad or a 50+ year old looking to secure the future of their children, taking out life insurance premiums comes highly recommended. We hope our article on factors that affect premium costs will come in handy.