Life insurance is not priced like other products. Items at stores, for example, have a set cost that everyone pays, regardless of the details about their personal lives. Life insurance is different – instead of a flat rate, the price revolves around the person buying it.
Why Do Insurers Charge Different Rates For Different People?
People buy policies to insure their lives, but insurers assign costs based on the length of life. Insurance companies have to be cautious. They can’t just disburse hundreds of thousands of dollars for nothing in return. They rely on premiums to ensure they’ll get enough in payments to give large payouts without being at a net financial loss. Insurance companies are more comfortable insuring young, healthy individuals who can expect to pay premiums for several years. If someone is older and in bad health, they have to increase rates to compensate for the individual’s inability to pay premiums over a long period of time.
What Influences Cost?
Your cost is determined by anything that can impact your life expectancy, such as:
- Age – the younger you are, the lower your premiums will be
- Gender – women live longer than men on average, therefore women pay less
- Occupation – certain jobs, like law enforcement, piloting, or anything requiring one to be in a dangerous situation, will cause premiums to be higher due to the inherent risk of death
- Lifestyle – smokers, recreational drug users, and those who consume alcohol regularly can expect higher rates. This also goes for hobbies – skydiving, rock climbing, and motocross carry higher mortality risks, and partaking in those can lead to higher rates
- Health – individuals with chronic and severe conditions (e.g., cancer, HIV, diabetes, and high blood pressure) will pay more than those without health problems
Rates can be affected by factors outside of your personal life, such as:
- Insurance type – term life insurance costs less because it’s temporary, and there’s a chance you’ll pay premiums without the insurer providing a death benefit if the policy expires. Whole life insurance costs more because it never expires, and the insurer will have to pay the death benefit as long as you keep up with your premiums
- Death benefit – the higher the death benefit, the more you will pay
What Doesn’t Impact Cost?
Interestingly enough, certain factors that would influence your rates in other types of insurance don’t come into consideration with life insurance. Where you live, whether you’re a homeowner, your credit score and your driving record are irrelevant when determining life insurance rates.
Get Your Lowest Rate With Us
At All Things Insurance, we can give you an estimate of what you’ll pay for your policy. We offer free quotes quickly so you can get an accurate idea of your premiums. We’ll also help you get the best policy for you and one for the lowest price. Call us today at (763) 645-5450.