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What affects the premium rates for life insurance policies?


Premiums on the life insurance policies are determined on the basis of the life expectancy of the individuals. The higher the life expectancy of a person, the lower will be his insurance rates. The insurance underwriting process evaluates how much of a risk an applicant poses before the insurer. The rates for his/her policy are set accordingly. If the underwriter marks any applicant as too risky, coverage won't be allowed to him/her. Influencing factors for life insurance rates

The following factors influence the rates charged on life insurance policies:

  1. Age of the individual - The age of the individual is directly associated with his/her life expectancy. The odds of survival are high for young persons, while the aged ones are considered to be more risky. Thus, if you buy your life insurance policy when young, you'll enjoy lower rates. As you grow old, the rates on your life insurance policy are also going to rise. Insuring an individual above 70 years is going to be a tough job.
  2. Gender of the person - Researches have pointed out that females, on an average, live longer than males. Thereby, insurance rates for a male are usually higher than a female. However, nowadays this factor has lost much of its influence over the policy rates.
  3. Pre-existing medical conditions - Pre-existing medical conditions refer to those illnesses which an individual already had, before he applied for life insurance coverage. A healthy person with no pre-existing condition is considered less risky than those who suffer from a disease. Thus, individuals with pre-existing conditions are either denied coverage by the insurance underwriters or have to pay more for their policy.
  4. Medical records of the family - Life insurers check the medical records of the family to determine if there are any health issues, like heart conditions, diabetes or cancer, which runs in the family. If a family member undergoes a serious medical treatment, before the age of 60, it might affect your life insurance rates negatively.
  5. Smoker or non-smoker - Smoking greatly reduces the life expectancy of a person. A smoker or nicotine user will have high chances of suffering from cancer, heart disease and many other smoking related ailments. Thus, they have to pay higher rates on their life insurance policies.
  6. Mental health of the person - A person undergoing depression or who has attempted suicide will either be denied coverage or have to pay more for their life insurance, since they are considered risky by the insurers. The insurers usually prefer well documented proofs of treatment and recovery, before they issue the life insurance policy to such an applicant.
  7. Occupation - Those who are involved in hazardous occupations, with risks to their life will have to pay more for their life insurance. Thus, miners or individuals involved in off- shore drilling, have to pay more for their life insurance policies. Journalists are considered risky while teachers can enjoy discounts on their life insurance policy, as they are considered safe.
  8. Hobbies or lifestyle habits - If you enjoy participating in adventure sports like race car driving, mountain climbing or bungee jumping, you might be marked as risky by the insurers. Engaging in such perilous hobbies will definitely raise your life insurance costs.
  9. Driving records - The driving records are checked by the insurers before they determine your life insurance rates. Driving records with DUI charges, traffic violations and lots of accidents would indicate that you have increased death risks. That means you'll have to pay more for your life insurance policy. A clean driving record would show that you're a safe driver, and so you'll enjoy lower rates.
  10. Credit history - The insurers evaluate your financial condition by looking into your credit reports. A fair credit report would mean that you handle your finances effectively, and would be less likely to miss your insurance premiums. Individuals with poor credit rating will be regarded as risky, and thus might be charged high for their life insurance coverage.
  11. Selection of coverage limits and benefits - It is evident that the rates charged on your insurance policy would depend on the coverage you seek. Increasing your insurance protection would simultaneously raise your premiums. Besides, insurance companies might mark you as bad risk if they come to the conclusion that the coverage you're seeking is more than what you need. As a result, they will either charge you higher premiums or reject your policy outright.
  12. Medical reports - Thorough health check-ups and medical tests are done before an insurer allows life insurance coverage to an individual. Certain conditions are maintained to term any individual as 'healthy'. Overweight or diabetic persons have to pay high premiums. The same applies for those individuals with high cholesterol or blood pressure levels.

  13. Besides, insurers also allow discounts to the customers, which can reduce the premiums considerably. The higher your life expectancy, the lower will be the rates which you have to pay. A healthy lifestyle can thus ensure low premiums for your life insurance coverage.

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