4 Factors of Life Insurance Rates

Life is filled with uncertainties, and life insurance helps you live through life with one less worry — the worry of “what if something happens to you?” Getting insured gives you and your loved ones a financial safety net, making it less difficult to deal with your passing. 

It gives them a financial allowance to take care of everything you’ll leave behind, from covering funeral services expenses and hospital bills to paying out loans, mortgages and other liabilities. 

For many, getting life insurance seems complex and expensive. About 53 percent of Americans are not sure what type of insurance they should purchase, while 36 percent believe they will not qualify for life insurance. Many people are not aware of how life insurance works. Hence they overestimate its prices or try to get one too late.

Your insurance coverage may vary based on your preference and the options offered to you. These options are also based on your age, gender, health condition, as well as other factors that can determine your mortality risks. Premium prices vary, and rates can fluctuate over time. 

It's also important to know all the factors that can affect your insurance before taking out a policy, to make sure that you have the right coverage for you. Knowing all the factors can help you determine which are constant and which are controllable. 

This can help you compare present and future prices, make adjustments and get the lowest insurance rates possible. Here are four factors an average insurance beneficiary should be aware of: 

1. Lifestyle

Lifestyle is a primary factor that affects insurance rates, as it also affects the person’s health and their life risks. People with good health and habits will likely get better rates, as they have fewer risks of being deceased early. On the contrary, people with health problems and a family history of health issues may have challenges in getting better rates. 

Moreover, your way of driving, as well as your hobbies and occupation, can also contribute to the risks you have. If you are often exposed to danger of any kind, insurance companies can consider you as someone who will likely claim your insurance sooner than the others. 

Smoking and drinking habits also affect your life insurance costs. Those who have been or are smoking (tobacco, cigarettes, taking nicotine or vaping) and/or drinking more often than the average may have higher health risks. 

Hence, insurance providers may charge higher premiums to them. For comparison, smokers can have rates two to three times higher insurance premium than the average non-smoking beneficiary.  To save on cost, people with health issues, working high-risk jobs or who are smoking can opt for specialized insurance products, including those with no medical exam required. 

This can give them life insurance coverage, which may be cheaper, despite their risks. Life insurance products are also offered to those looking to quit and recover from smoking, drinking or drug use. 

2. Occupation

Your current occupation is an important factor in determining your insurance rates. Suppose your job poses a threat to your life, or you work in an environment that’s hazardous or dangerous. In that case, insurance companies may identify you as a high-risk applicant and may charge you higher premiums. 

Some even charge an extra flat fee for high-risk jobs. These jobs include armed personnel (police, soldiers, etc.), firefighters, construction workers, people who work at heights (window cleaners, scaffolders, roofers, electric linemen, etc.), pilots and many others. 

In addition to the dangers and risks that may be involved in your job, life insurance is a long-term commitment. Hence insurance providers often prefer policyholders to have a long-term stable job or source of income. 

Because of this, freelance workers and contractual employees often have limited options. They often qualify for short-term policies and insurance with very limited coverage. 

3. Riders

When getting life insurance, you’ll be offered the option to riders, which are supplementary benefits you can add to your policy. Most life insurance offers a death benefits rider, where your beneficiaries can get a lump sum upon your death. 

But there are living benefit riders, which are often offered as an add-on, where you can use a portion of the sum assured even while you are living. This can cover your health and even give you coverage for accidents and other incidents which may lead to your demise or even cause long-term damage.

Life insurance policies offer additional riders, especially for accidents, hospitalization and unexpected disablement. Riders do not incur flat rate charges, but it may increase the total premium you’ll be paying. 

Critical illness riders often incur higher costs, as these can cover life-threatening sicknesses and severe conditions requiring long-term treatment and hospitalization. There are also riders or extra coverage you can add to your policy considering your age or medical condition, including some types of senior life insurance plans, which can cover long-term care when you reach your senior years. 

4. Criminal History 

Any type of insurance is a legal contract that grants the policyholder a payment when any of the agreed conditions or incidents occur. Therefore, insurance companies need to ensure that, as much as possible, their clients abide by the law. This is to ensure that claims will be made with honesty and transparency. 

Some providers check criminal history and consider this in calculating premiums. People with misdemeanors or charged with minor offenses, like traffic violations, as well as alcohol and drug-related cases, can raise a red flag. But this will not prevent you from having insurance coverage. It may only require higher premiums as well as supporting documentation that you will need to submit. 

Moreover, those charged with felonies and convicted may have a lesser chance of actually being qualified for life insurance. Felons sentenced to several years of imprisonment are considered high-risk applicants, as they are exposed to an environment that puts their health at risk. But there are still life insurance options for those with felonies, offered by insurance agents and companies catering to high-risk beneficiaries. 

Those who are convicted of heinous crimes will be declined traditional insurance coverage, but they may still have options like the final expense or accidental death coverage. Often insurance coverage and premiums will still depend on the type of offense, the status of the charges, your health and age, and whether you are on parole or probation.

Get the Best Life Insurance Rates

Life insurance is a form of investment that is meant to protect your most important asset — yourself and your loved ones. It’s important to know all the factors that affect life insurance rates today to plan out properly what type of insurance you should get. 

Based on your current physical and financial conditions. Consider all these factors and make adjustments where possible to find the best rates and most beneficial coverage for you and your family.