Every purchase you make is going to come at a cost. Your insurance investments are no different. If you are planning to buy life insurance, then you are going to have to pay for it. However, the fact is that what you pay for your plan is going to be different from what your neighbor pays for theirs. Numerous risk factors influence the ultimate cost of your policy, and at the end of the day you want to pay a price that represents appropriate value for your chosen product.
Let’s take a closer look at the factors that could influence your life insurance costs.
Life Insurance Risks and Their Impact on Premiums
All insurance premiums are based on the policyholder’s risk ratings. These risk ratings are calculated based on your likelihood of filing a claim on a policy. Numerous factors can influence this likelihood, and the higher your chances of filing a claim, the higher the price you might pay for your premium.
When it comes to life insurance, factors influencing your premium relate to the value of the policy and your likelihood of death. After all, when you die, it is your life insurance that will pay a death benefit to your family. Therefore, if you are more likely to die, you are likely to pay more for your policy.
Consider some of the factors that can influence your premiums:
- Age: It is of course obvious that someone who is over 50 is a lot more likely to die than someone who is under 30. As a result, younger people are more likely to pay lower premiums
- Medical History: Individuals with a history of severe issues like obesity, diabetes, cancer or other chronic illnesses have higher mortality rates, even if they are in good health otherwise.
- Occupation: If you work in a high-risk industry, such as one that involves manual labor, then there is a higher chance that you will die on the job, or as a result of conditions caused by your working environment.
- Death Benefits: Your death benefit is the amount of money paid to your loved ones after your death. If you buy a higher death benefit, then that’s more money that you will eventually cost the insurer.
- Tobacco Use History: If you are a smoker, or have previously smoked, then your risk level for cancer and other severe illnesses will significantly increase.
- Policy Type: If you buy a whole life insurance policy, as opposed to a term policy, then you buy a plan that will remain in place for the rest of your life, rather than for a certain number of years. Therefore, your plan will eventually pay a death benefit, and that’s an extra risk to the insurer.
At the time that you enroll in your life insurance policy, talk to your agent about your budget and your objectives for your plan. They can help you determine what exactly your coverage needs are, so that you never have to wonder whether you are paying the right price for the benefits you need.
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