The Price of Protection: Factors Impacting Your Life Insurance Premiums
May 31, 2024
You work hard to protect your family and meet their needs. It’s terrifying to think about what would happen to them if you couldn’t be there to support them. That’s why life insurance is such a crucial (investment) part of your overall financial planning. It gives you peace of mind to know there’s financial help available when your family needs it most.
Yet, when it comes to buying life insurance, it’s not always clear how premiums work. Take a few minutes to learn the various factors that influence life insurance premiums. Then, let our team at 1891 Financial Life offer guidance in getting a policy that fits your needs.
How Life Insurance Premiums Work
Premiums are the costs you pay to purchase a life insurance policy. Premiums give you the confidence to know that your family’s financial protection is in place should something happen to you. By making on-time payments in accordance with the policy’s terms, you keep that peace of mind intact.
Ensuring your life insurance premiums fit into your budget is also critical. Striking a balance between your coverage needs and budgetary constraints ensures you get the financial protection you need without straining your finances.
What Factors Impact the Cost of Your Life Insurance Premiums?
Numerous factors impact life insurance premiums. Insurance companies assess the following factors to determine your risk level:
- Age: Younger individuals typically pay lower premiums.
- Health: Good health often results in more favorable rates.
- Lifestyle: Habits like smoking can increase premiums.
- Occupation: High-risk jobs, such as construction work or commercial fishing, may lead to higher costs.
- Policy types: Different policies have varying costs.
Your health status is a particularly critical factor that affects life insurance costs. Insurance companies use this information to determine whether you’re likely to suffer a serious, life-shortening illness at any given time. They look at:
- Any diagnosis of significant medical conditions or diseases
- Pre-existing conditions, such as previous life-threatening surgeries or illnesses
- Your risk factor for developing more complex health risks, such as being pre-diabetic
How you live matters to insurance companies, too. If you’re all about high-risk adventure, that factor makes you more of a risk for the insurance company, increasing premiums.
Policy Features and Coverage Amount
Numerous policy options exist to give most people access to coverage that fits their needs. Your choice of policy, riders, and coverage levels determines your cost. Contributing factors include:
- The coverage amount or the amount you want available to your beneficiaries should something happen to you
- The term length, with longer terms tending to cost more
- Added riders that allow you to specialize the policy
- Premium costs associated with the insurance provider and current market pricing
Selecting the best coverage level is a good starting point in this area. Choose enough to provide financial support to your family for three to five years after your death or enough coverage to pay off all your debts, like your mortgage. Aim to balance how much coverage you purchase with what’s in your budget.
Understanding Underwriting and Risk Assessment
The underwriting process involves evaluating your application for risk factors. Insurance companies rely on accurate information to make premium decisions, so it is important for you to disclose all information about your health and lifestyle.
If you don’t reveal a health diagnosis on your application, your family may be unable to collect that compensation later. Check your application for accuracy to ensure a fair standard premium price.
Strategies for Lowering Premiums
You can lower life insurance premiums by reducing the risk you present to the insurance company.
- Work to improve your health. Live a healthy lifestyle that incorporates exercise and a healthy diet.
- Avoid smoking.
- Limit alcohol use.
The More You Know
Understanding the factors that impact life insurance premiums is crucial for anyone seeking coverage. By demonstrating lower risk, you can secure affordable life insurance that protects your family’s future.
With the right knowledge and guidance, you can make informed decisions and ensure comprehensive financial security for your loved ones. Partner with the insurance professionals at 1891 Financial Life to gain clarity on your premium costs and find the best coverage for your needs.
About 1891 Financial Life
Our culture is about looking out — for you, for others, for family, for the community. That is how we go “Beyond Life Insurance.”
At 1891 Financial Life, we don’t just sell policies, we offer possibilities. We pride ourselves on giving back to the communities that we serve by providing quality and comprehensive insurance solutions. We are a not-for-profit life insurance Society, which means the sales from these financial service products help fund member benefits along with social, educational, and volunteer programs designed to respond to community needs. In 2023, 1891 Financial Life was listed by Forbes as one of "The World's Best Life Insurance Companies."
Our portfolio is extensive, ranging from various life insurance policies to our annuities to support your financial needs no matter what stage of life you’re in.