How Your Life Insurance Premiums Are Calculated
Life insurance is difficult enough to understand, but understanding how company computes your premiums is even harder. Calculating your life insurance rates is not as simple and straightforward as calculating your premiums for other kinds of risk, like fire insurance. The rates you pay for life insurance coverage are based on your state of health at the time you apply for the policy, and that risk assessment is made by a qualified medical professional. If you are not in good fit, or if you indulge in risky behaviors such as smoking or street drugs, the insurance company expects to have to pay out more benefits on your policy than if you were totally healthy and did nothing to put your health at risk. That is the reason insurance companies usually require a physical exam before issuing your 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.
From all these reports, the insurance company assigns you a score reflecting your risk. That is why the premium you actually pay may not be the same as the quote the agent gives you when you apply for coverage. If the company finds that you are at a higher risk level than originally assumed, your premium will almost certainly be higher than your quote.
There are ways to lower your risk. Take care of your health. Maintain a healthy weight, eat a well-balanced diet and exercise regularly. If you smoke, then quit. Be a safe and defensive driver. Don?t get speeding tickets or into accidents that can raise your insurance premiums. Make smart decisions and don?t engage in dangerous, risky behavior.
The insurance provider will also take into consideration things that you cannot control, like your age and gender, when determining your life insurance premiums. That is why it is important to improve your health and lower your health related risks. Risk assessment policies vary, depending on the life insurance provider. That is why it is a good idea to do research, ask questions and get several quotes before deciding on 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.
From all these reports, the insurance company assigns you a score reflecting your risk. That is why the premium you actually pay may not be the same as the quote the agent gives you when you apply for coverage. If the company finds that you are at a higher risk level than originally assumed, your premium will almost certainly be higher than your quote.
There are ways to lower your risk. Take care of your health. Maintain a healthy weight, eat a well-balanced diet and exercise regularly. If you smoke, then quit. Be a safe and defensive driver. Don?t get speeding tickets or into accidents that can raise your insurance premiums. Make smart decisions and don?t engage in dangerous, risky behavior.
The insurance provider will also take into consideration things that you cannot control, like your age and gender, when determining your life insurance premiums. That is why it is important to improve your health and lower your health related risks. Risk assessment policies vary, depending on the life insurance provider. That is why it is a good idea to do research, ask questions and get several quotes before deciding on a life insurance policy.
About the Author:
Tom Martens is the content syndication coordinator at Lifeinsurance-Southafrica.co.za South Arica?s leading Life Insurance and Life Cover portal.
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