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 physical is done, the company will review not only the results of the exam, but also your family medical history, your driving history, and possibly other medical reports and a credit report 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 life insurance company will also consider factors you cannot control, like your gender and age, in setting your premiums. That is why it is so important to do everything you can to improve your health and lower your risks. It's a good idea to do your fact finding, ask questions, and get several quotes before deciding on a life insurance policy.
Once the physical is done, the company will review not only the results of the exam, but also your family medical history, your driving history, and possibly other medical reports and a credit report 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 life insurance company will also consider factors you cannot control, like your gender and age, in setting your premiums. That is why it is so important to do everything you can to improve your health and lower your risks. It's a good idea to do your fact finding, 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.
posted by Credit Counseling at
3:50 AM
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