Meet Amanda, a 35-year-old accountant, and her husband, a retired 55-year-old police officer with a combat injury. They’re both looking into term insurance for some financial peace of mind. So, who do you think might be paying higher premiums each month?
If you’re not sure, don’t worry—you’re not alone! Many people don’t fully grasp the factors that affect insurance premiums, and as a result, they end up spending more than they need to.
That’s why it’s important to understand what influences your premiums. Asking the right questions can help you find the perfect insurance coverage for your needs and budget. Plus, it can save you a ton of money in the long run.
If you’re still feeling a bit lost, don’t fret! In this article, we’ll cover the various features of insurance policies that can either raise or lower your premiums.
Your Age
Your date of birth is a key factor that affects life insurance premiums. Do you know why? Because, statistically, younger people have more time to pay and are less likely to get ill.
But, you know, as you age, there is a greater risk of deteriorating health conditions due to illnesses. So, expect to pay higher premiums as you grow older!
Gender/ Sex
Do you know women have to pay less on premiums than men? While many consider it as gender biasedness and sexism, that’s not the case. Scientifically proven, women tend to live longer than men (nearly by five years!); thus, insurers charge them less.
This is why you have a gender identity column on your insurance policy form. It helps the insurance provider in calculating your premium.
Health History
Before you sign up for a policy, you need to go through an underwriting process to assess your eligibility for the said coverage. Your height, weight, medical condition, and other vital metrics will be noted down. If you have been combating critical illnesses like high blood pressure, heart disease, diabetes, or cholesterol, you might even undergo medical tests. And don’t be surprised if your premiums are higher than most!
Besides, insurers will add a few more zeros to your life insurance cost if they notice any physical disability. There’s also the risk of rejection for people with life-threatening conditions.
Lifestyle
If you’re an adventurist, be ready to pay higher premiums. Weekend parties, exploring Mother Nature, and socializing give you the much-needed adrenaline rush, but it doesn’t settle well with insurance companies. Your adventurous life choices, such as kayaking, mountain climbing, skydiving, race car driving, and rock climbing, put you at risk of early death.
Therefore, they are huge red flags for insurance companies, and thus, they charge you high premiums.
Smoking/Vaping Habits
While cigarettes can turn your stress into smoke, it’s quite problematic for your health and financial security. These tobacco sticks can be one of the detrimental causes of high insurance premiums. And it’s not only about cigarettes; nicotine consumption in any form leads to higher premiums.
But the sun is shining at the other end of the bridge. If you quit smoking in the future, you will qualify for non-smoker premium rates.
Driving Record
Your driving record can come into play during the underwriting process! They can ask you directly about your driving mishaps. Or, the insurance provider can access your Department of Motor Vehicles records to verify – So there’s no way to hide it!
Fortunately, not all driving violations are considered a problem. The insurance companies focus on only the last three to five years to assess your driving habits. So, you can ensure a comparatively lower premium by skipping the drifts and driving responsibly.
Professional Occupation
Risky jobs are another red flag for insurance companies. So, if you’re in a high-risk career, like aircraft pilot, firefight, police officer, or mining, expect to cough up extra dollars.
Additionally, you might need help finding an insurance provider willing to write you a policy!
Criminal Record
Your criminal record can have an impact on your life insurance journey. Whether you’ve got a DUI or a felony, it can send ripples through your life insurance and- wait for it- your eligibility!
But here’s where it gets tricky. If you are in the middle of a legal battle, behind bars, on probation, or on parole, getting life insurance might feel like an uphill battle.
Type of Policy
The specifics of your life insurance policy can affect the premium. Now, if you want temporary life insurance with adequate death benefits, you get to pay comparatively lower premiuns. But if you add frills to it or buy high-end permanent life insurance, you will be coughing up a few extra thousands in premiums.
Credit Amount
Did you know that in some states, your credit amount can affect how much you pay for insurance?
So, if you’ve got a fantastic credit score, you are entitled to low premiums. Fret not if your crediiit points don’t look that good. You can pay off your outstanding loans or negotiate with your lenders to improve your credit score, which, in turn, can lower your monthly premiums.
Coverage Amount
Here’s the scoop- life insurance premiums can go up or down depending on the coverage you need. For that reason, you should purchase a policy that fully covers your loved one’s financial needs.
After all, life insurance is to take care of your family when you pass away.
Current Financial
Another element insurers check before handing over your policy is your finances. Many insurance providers might say, “Sorry, not this time!” if you’ve recently encountered bankruptcy.
But here is the kicker- the waiting period can vary from two to five years! So, if you are in the post-bankruptcy zone, an experienced life insurance provider can be your secret weapon. With their expertise, you can find an insurance company willing to take a chance on you.
To Sum It Up
Although none of us can look into the future, life insurance can bring peace of mind to you and your loved ones. It is like a safety net, ensuring that if life throws a curveball and you’re no longer around, your family won’t have to juggle financial hardships with their grief.
But life insurance isn’t a one-size-fits-all deal! So, before you dive in headfirst, consider these factors and the different flavors of life insurance to choose the right one for your needs. Get to know your options, consult with an expert, and compare quotes to ensure you’re on your way to securing your family’s future.