There are many factors underwriters consider when determining term life insurance rates. As a rule of thumb, term life insurance premiums are primarily based on the age of the insured and the amount of the policy. However, many other aspects of your lifestyle also figure into the cost of life insurance.
Using the Internet to access a wide range of information, as well as sophisticated software tools that calculate risk, insurance underwriters look at medical records, family history, lifestyle, driving records and even credit scores.
Once these factors are assessed, underwriters assign you a health class or rating, and this determines your term life insurance premium.
Factor No. 1: How Your Age Determines Your Life Insurance Rate
Your mortality rate is a key factor for underwriters. If you are age 65 or older, you are much more likely to have serious health complications and you have a significantly higher mortality rate than someone in their late 20s.
Factor No. 2: Your Health and Your Insurance Rate--Factors Underwriters Consider
Your health is one of the most important factors that determine your life insurance cost. Your life insurance quote could be higher based on a history of:
- High blood pressure
- High cholesterol levels
- Mental health
- Diabetes
- Medication
To an insurance underwriter a history of high blood pressure means you are at risk for a variety of medical problems, such as kidney failure, heart attack or stroke. High cholesterol levels may indicate risk of stroke, coronary heart disease and other serious medical conditions. Diabetics may face a host of current and future health problems that also affect life insurance quotes.
Mental health history also forms a part of risk assessment. Applicants who are clinically depressed or take anti-depressants potentially pose a higher risk for suicide. Underwriters also consider any medications you regularly take and the underlying reasons for the medication.
Factor No. 3: Your Job and Your Term Life Insurance Rate
Your job determines the type of risks you take each working day. High-risk jobs pose a danger to your life and place you in a higher insurance bracket, whereas safer jobs mean lower term life insurance rates.
Factor No. 4: Your Lifestyle and Your Insurance Premium
Thrill seekers face higher life insurance rates due to increased risk of accidental death. Sky divers, bungee jumpers, hang gliders, auto racers--all pose substantially more risk for the insurance company. As a result, extreme sports athletes face higher insurance premiums.
Factor No. 5: Smoking and Your Term Life Insurance Rate
Insurance underwriters do not typically offer the best rates if you fall into the "tobacco user" category. After two or three years you can obtain a non-smoker rating on your policy, and if you haven't used tobacco in five or more years, you may qualify for the best term life insurance premiums--a savings of 20%- 30% over a "tobacco user" classification.
Factor No. 6: Your Credit Score
Many insurance companies look at your credit score to determine your insurance premium. The thinking? If you've been irresponsible with your credit, you also might be irresponsible in other significant aspects of your life and potentially pose a higher insurance risk.
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