Life insurance policies are all about risk. They pay when something tragic happens, but the company is banking on the fact it will not be soon. That brings up the question of how are the rates set? What goes into determining how much you will be asked to pay? Here's a look.
Age – Naturally, the first thing a life insurer takes into account is your current age. Younger people will of course pay less than older ones.
Occupation – The next risk a company looks at is what you do for a living. If you work in a high risk occupation like a high rise window washer you can expect to pay much higher rates than someone the same age that who works in an office at a computer all day. Something else that can influence your rates is any dangerous hobbies. For example, if you enjoy mountain climbing you can expect to pay higher life insurance premiums than someone who collects stamps or coins.
Health – This is arguably the single biggest factor in setting premium rates. A company will look over your health history, current medical conditions, if any, and use that information to determine insurability. You will also be asked to take a quick medical exam in most all cases. In some instances you may be denied a policy and in some you may be rated up.
Tobacco – Another factor that companies will use is whether you use tobacco products. This can include not only cigarettes, but cigars, chewing tobacco, etc. The facts tell the truth, tobacco use is the single biggest cause of preventable death in the US If you use tobacco, you will be asked to pay a higher premium.
These are some of the major factors that go into setting life insurance rates.