What You Need to Know About Life Insurance Rates


What You Need to Know About Life Insurance Rates

This is because life insurers who exclusively offer life insurance take a lot more time to assess risk, rate each client, and stay profitable in the industry. But some insurers who offer multiple lines of insurance also offer very competitive insurance rates when the applicant qualifies for multi-line discounts. Requesting life insurance quotes is the only way to really tell which companies are competitive and which are not.


Wise consumers who are applying for life insurance need to do more than just compare the quotes they receive. They should also take time to understanding the factors that insurance companies use to calculate rates and factor in risk. Some applicants are considered more risky than others because they may have shorter lifespans based on the statistics that actuaries use to calculate reasonable rates. Without knowing what is considered more risky, you risk the chance of accepting a quote that will eventually be higher once you complete the underwriting process. This is why understanding the underwriting process and what life underwriters are looking for is so important. Read on to see how your lifestyle, medical history, age, and gender can affect your rates.


What Do Agents Ask Personal Questions?


When you apply for life insurance benefits, it is pretty much common knowledge that the insurance agent is going to ask you personal questions. After all, if you are asking the insurance company to pay your beneficiaries hundreds of thousands of dollars if you pass away, the insurance company wants to know that you are not only buying coverage because you expect to die in the near future. This is why it feels like the agent may be prying when they are asking you all of the underwriting questions.


Sub-Standard, Standard, and Preferred Rates


If you are applying for a traditional life insurance policy, the application will be underwritten by professionals who can review medical records, look for the red flags, and assess risk. If you are in excellent health and you do not live a dangerous lifestyle, you should pay standard or preferred life insurance rates. On the other hand, if you have had medical conditions in the past that could be a threat to the company, you may be rated as a sub-standard risk and pay higher premiums.


What Factors Do Life Insurance Companies Consider to Calculate Rates?


Knowing the factors that an insurer will consider can help you prepare during the application process. While some of the factors like age and gender cannot be changed, other lifestyle changes may help you lower your premiums. The factors considered by most traditional life insurers include:


* Age:


Obviously, the younger you are the less of a risk you will be. This is especially true when you are purchasing term life insurance benefits. Term life lasts a specified period of time. If the probability of a policyholder dying is low within the term, the premiums will be low. Premiums can also be significantly lower for younger applicants when permanent insurance is concerned. This is primarily because the policyholder will be paying the premiums over a longer period of time so it is less likely that the insurer will lose money when benefits must be paid.


* Medical History


You can still be young and pay high rates if you have pre-existing conditions. Your medical history will play a huge role in whether or not you will even be approved for insurance. Some insurance companies will accept individuals with skin cancer, heart disease, type 1 diabetes, type 2 diabetes and other physical conditions. Other companies will not even consider someone who has a pre-existing condition. It all depends on if you are expected live a normal lifespan and if you are willing to pay higher premiums.


* Lifestyle


After age and medical history comes lifestyle. Age and medical history cannot be changed but your lifestyle can if you are willing to take the steps necessary. If you are involved in hazardous avocations, you have been convicted of driving under the influence, or you smoke, you will be considered more risky. Here are some of the lifestyle factors insurance companies will use for rating:


·         Nicotine or Tobacco use

·         Drug use

·         Hazardous avocations

·         Flying

·         Scuba diving/Sky diving

·         Foreign travel to danger areas

·         Racing cars, bull riding, boat racing

·         Poor driving record

·         Occupation


How Will I Know if I am Considered a Good Risk?


Insurance companies are not going to come out and tell you that you are a bad risk. What they will do is classify your policy with a title. Here are classifications you might see in order from the lowest life insurance rates to the highest:


·         Super Preferred

·         Preferred

·         Standard Plus

·         Standard

·         Preferred Tobacco

·         Standard Tobacco

·         Table Ratings (rates increase by 25% with each number in the table)


Now that you know how your rates are calculated, you may know what to expect when you are applying for insurance. Know that quotes are just estimates and your application must be approved before you know what you will pay. Compare quotes, be honest on your application, and budget accordingly.

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