How are life Insurance Premiums Calculated
Life insurance is hard to understand, but understanding how the premiums are computed is even harder. Calculating premiums is not as straightforward as calculating premiums for other kinds of risk. Your life insurance rates are based on your health at the time you buy the policy, and that risk assessment is made by a physician. If you are not in top shape, or if you indulge in risky behaviors, the insurance company expects to pay out more benefits than if you were healthy and did not put your health at risk. That is why a physical exam is usually required before a company issues 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.
In addition to the driving and medical reports, your insurer will ask you to fill out a questionnaire about your lifestyle and health issues. Although it may be tempting to sway the results, be honest as you answer the questions and fill out your medical history. If you are found to have been dishonest anywhere in your application, then the company can refuse to pay benefits in the future. Any insurance company will be able to cancel your life insurance policy if they determine you lied during the application process.
After reviewing all these reports, the company assigns you a score that reflects your risk. That is why the premium you wind up paying may not be even close to the quote the agent gave you when you applied for coverage. If the insurer determines that you are a higher risk level than was originally assumed, your premiums will be higher than your quote.
Life insurance companies tell us that there are ways to lower risk. In general, take good care of your health. Stick to a healthy weight. Eat well-balanced meals. Get out and exercise on a regular basis. If you are a smoker, quit. Drive safely, and don’t get tickets. Auto insurance claims may also raise your life insurance premiums, not just your car insurance premiums. In general, enjoy your life, but avoid unnecessary risks
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.
Tom Martens is the content syndication coordinator at Lifeinsurance-Southafrica.co.za South Arica?s leading Life Insurance and Life Cover portal.
