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So How Much Does Life Insurance Cost?
The cost of life insurance is highly dependant on a number of personal factors about yourself (or the person who is being insured). In the insurance game there is no limit to the amount of prejudice that can be used in determining your life insurance rates – whether it be Age, Gender, Lifestyle choices, Occupation; they all get taken into account when a life insurance company is determining your life insurance premiums.
Life Insurance Cost Factors
When getting life insurance quotes there are a few different personal details an Insurer will need to ask you before they provide you with a full quote.
Age
Your age plays a huge role in the calculation of your premium, it doesn’t take Einstein to work out that the older you get the more the statistics are swayed against you in terms of life expectancy. Therefore age is the number 1 determinant of your life insurance quotes.
Gender
Statistically, women have a longer life expectancy than men. The reasons behind this statistic don’t really matter, as actuaries (who are the analysts who calculate risk in insurance and thereby assign values to life insurance premiums) only care about the actual statistics and are completely objective in doing so. This is why Women typically have a lower life insurance premium.
State of Health
Very few insurance companies will commit to a life insurance quote without you going for a physical examination, including numerous blood tests and diagnostics. This will determine if you have any illnesses that will affect your life insurance quotes.
Smoker or Non-smoker?
As anyone who is a smoker will attest, smoking not only affects your health, it has a huge impact on your finances, this is again the case when it comes to getting life insurance. Your premium will be increased if you are a smoker and the fact that there is a physical health assessment doesn’t make it very easy to hide the fact that you enjoy the odd cigarette.
Occupation
Do you work in a cushy office job, or are you down in a mine slogging your guts out. Since you spend the majority of your waking hours at your job, it only makes sense for insurance companies to take this key part of your lifestyle into account when calculating your life insurance premium.
Do The Time
Another factor determining your life insurance costs, is the length of time you are insured, the longer you are insured, the less risk there is that the insurance company is losing money, and so you are rewarded with diminishing premiums, the longer your are with a particular life insurance company.
Here’s some more information on how personal factors will affect your life insurance quotes:
With age being the number 1 factor for determining your life insurance quote, for many people it is the one that makes or breaks their decision to pursue a policy or not. When we are young and single, our legacy and caring for those around us are the last things on our mind. Most are out partying, and taking risks that no middle-aged person in their right mind would ever imagine. Then as we get older and decide to settle down, we start to accumulate responsibilities such as children and mortgages, we are faced with the reality that tragedies can sometimes happen, and what that would mean for your loved ones if you passed away suddenly.
It is for this reason that most of us are a little older when we take up our first life insurance policy. This does mean that you will pay the price of higher premiums. You see, when a person obtains life insurance at a young age they are given a good premium, then as they maintain that coverage into their old age with the same provider – their premium will reduce over time, as they will have reduced the downside of the insurance company by paying their premiums over a long period of time.
The best thing to do would be to map out your future – when will you be able to buy a house? What kind of money does your Spouse earn? Will they be able to cope with mortgage repayments and bills if you pass away all of a sudden.
Most of the time your current state of health is a good indicator for life expectancy. Insurance companies take evaluation of health very seriously when it comes to life insurance. The reality is, the more unhealthy you are, the more likely your policy is on the fast track to being cashed in. Insurance companies therefore need to factor this in when calculating your life insurance quotes.
As mentioned previously, lifestyle is a big factor in determination of your premiums and if you decide not to be forthcoming with some of your less desirable habits, then your physical health exam may return some strange results – like liver damage (if you state you are not a drinker) and damage lungs (if you state you are not a smoker). At the end of the day, test results don’t lie, people do, and insurance companies are certainly aware of this.
So if you are thinking of getting life insurance, you would be encouraged to perhaps go on a health binge in the months leading up to obtaining your quotes. Going on a bit of a detox would not be the worst thing in the World for your health – if done right – consult your General Practitioner and he can help you out with what you can do to improve your lifestyle and make yourself a more desirable candidate for insurance companies.
As we eluded to above, lifestyle choices such as smoking, drinking and drugs can have a significant effect on your health and therefore your life expectancy. These vices are not only a strain on your physical health, but also on the hip pocket when it’s time to get a life insurance quote.
Smoking
Statistics over time have obviously shown that the mortality rate for smokers is higher than in non-smokers. Life insurance companies tend to err on the side of caution when it comes to smoking, by loading up their premiums to compensate for the increased risk they are taking on.
On the other hand, some life insurance companies in Australia take a different approach when it comes to smokers. Some insurers may make an assessment of how much tobaco/nicotine is consumed by the insured. They then assign a category to that person – whether they be a heavy smoker, or a habitual social smoker. A social smoker would be someone who has 12 smoking sessions per year – only on celabratory occasions. A heavy smoker would be anyone who smokes more than one packet of cigarettes per week.
Drinking
Unlike smoking, drinking alcohol is more socially acceptable and has become an Australian way of life. In fact there are many Australians who deem it to be “un-Australian” to not drink alcohol. Leaving the patriotism aside, heavy drinking has been shown to have an adverse effect on your health, so although your life insurance premium may not rise if you enjoy a glass of wine or two with dinner, drinking excessively will force the insurance company to categorize you as a heavy drinker, thereby increasing your insurance premiums.
Although it may be tempting to tell a little white lie on your application, it would be advisable not to. If your medical exams show any signs of poor lifestyle choices, the insurance company may decide against insuring you for being dishonest.
