What Factors Into Your Life Insurance Premiums

June 8, 2023

When you start exploring life insurance solutions for the first time, you might wonder how companies determine the premiums. The underwriting process may seem arbitrary from the outside, but it relies on complex calculations to assess the risk factors associated with each policy. Understanding those risk factors can help you better prepare for your quotes and potentially save money.

Your Age Affects Your Life Insurance Cost

One factor contributing to the cost of your life policy is your age. Younger policyholders typically have lower premiums. Ultimately, this is because your insurance carrier estimates you will live longer. It reduces the risk associated with the policy, lowering the premiums.

Your Health Is a Factor in Life Insurance Premiums

When applying for a life policy, you must provide information about your current health. Any medical conditions you have and any hereditary conditions in your family will affect your premium calculation. Many policy applications require a medical evaluation as part of the underwriting process, while others include a health questionnaire.

Your Lifestyle Contributes To Life Insurance Rates

Many of your lifestyle choices will contribute to the risk factors associated with your life insurance policy. Your career choice, for example, is a factor. You might pay higher premiums if you work in a high-risk or dangerous industry. The same applies if you have risky hobbies, including motocross, skydiving, or rock climbing. Your insurance carrier may ask if you smoke or drink alcohol as well. These behaviors can increase the risk factors associated with your policy.

Your Driving Record Helps Determine Life Insurance Risk

Insurance carriers consider driving records when evaluating policies. Applicants with a clean driving history often have lower life premiums because their responsible driving history shows lower risk factors. Applicants with a history of unsafe driving, irresponsible decisions behind the wheel, and accident claims are at higher risk, which leads to higher life policy premiums.

Your Life Insurance Policy Affects Premium Calculations

There are several types of life coverage policies, each with different rating factors. For example, term life typically has the lowest premiums because those policies have a defined coverage period and generate no cash value. Universal or whole life, however, remains valid as long as you pay your premiums, and then the policy builds cash value over time. These factors lead to higher premium costs.

The Death Benefit Factors Into Life Insurance Premiums

Many policyholders overlook the effect of the chosen death benefit on the policy cost. Lower limit policies, often considered burial policies, traditionally have the lowest premiums. The higher your chosen death benefit, the higher your premiums become.

Understanding the factors that come into play with life insurance premiums can make it easier to secure a policy you can afford. Balancing the right coverage with your budget means considering all these factors before submitting your life insurance application. The more information you have before you apply, the more precise your policy quotes become.

About 1891 Financial Life

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.

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.