How Your Life Insurance Premiums Are Calculated
Life insurance can be complicated to understand, especially when it comes to how the premiums are calculated. It?s not as simple as other insurance policy purchases. First, your life insurance cost is based on your health at the time of purchase and a risk assessment that is conducted by the insurance provider. If you are unhealthy and/or engage in risky behaviors, expect to pay higher costs for your life insurance than someone who is healthy and doesn?t put themselves at risk. That is why a physical examination is required before the provider issues a life insurance policy.
Once the results of the exam are, the company will review not only those findings, but also your family’s medical history, your personal driving history, and probably records of your health insurance claims and credit score as well.
Life insurance companies usually ask you to fill out a questionnaire about your lifestyle and health issues that do not come up during a physical. However tempting it may be to try to sway the results, be honest as you answer the questionnaire and as you fill out your medical history. Any dishonesty anywhere in your application will give the company grounds to cancel your policy in the future?perhaps after you are gone and cannot do anything to contest it.
After the insurance provider obtains all the reports, you are assigned a score based on your risk. The lower the risk, the lower your life insurance premium. Therefore, the premium may not be the same as the quote the insurance provider gives you when you apply for the policy. If the provider determines you are at a higher risk level than originally assessed, then your premium will be higher than your quote.
Life insurance companies tell us that there are ways to lower risk. In general, take good care of your health. Stick to a healthy weight. Eat well-balanced meals. Get out and exercise on a regular basis. If you are a smoker, quit. Drive safely, and don’t get tickets. Auto insurance claims may also raise your life insurance premiums, not just your car insurance premiums. In general, enjoy your life, but avoid unnecessary risks
The insurance company also considers factors outside your control, like gender and age, in computing your premiums. That is why it is so important for you to do everything possible to improve your health and lower your risk. It’s a good idea to do your research, ask several rounds of questions, and get several quotes before choosing your life insurance policy.
Tom Martens is the content syndication coordinator at Lifeinsurance-Southafrica.co.za South Arica?s leading Life Insurance and Life Cover portal.