Factors That Influence Life Insurance Rates
Published: 03/10/2013 by Kevin Mulligan
Going without life insurance is a ignorant decision no matter what your income level is. Everyone needs to have, at minimum, a basic policy that will cover funeral costs if they die unexpectedly. Truly, the minimum amount you need is about 10 times your annual salary so your family has a financial cushion and time to adjust to living without your income coming in.
Life insurance can seem unattainably expensive, but it doesn't have to be. There are key factors that influence the cost of your life insurance, and knowing those factors can help you adjust your lifestyle to avoid unnecessarily high costs.
Factors that Influence Life Insurance Rates
Here are 8 factors that can greatly change your life insurance cost.
Type of Coverage
First, the type of life insurance you get can drastically change the annual cost to you. Term life insurance rates are significantly lower than whole life insurance because there is no investment portion of the monthly premium. A term life policy might be as little as $20 per month while an equal whole life policy might cost you $200 per month.
Amount of Coverage
The total amount of coverage will of course change your premium. A $250,000 policy will be significantly cheaper than a $1,000,000 policy.
How old you are tells the life insurance company how many years they will have to insure you up to your death. The younger you are the cheaper your policy will be because most term life insurance policies come in 10, 20, and 30 year terms. If you buy a 30 year policy at age 25 you will get a cheaper rate than if you buy it at age 35 because from an actuarial point of view you are less likely to die from age 25 to 55 than from ages 35 to 65.
On average women live longer than men. So if you and your wife each get a $500,000 term life insurance policy, assuming all other health factors are the same, her rate will be lower than yours.
Most life insurance firms will send a travel nurse to your home to take your blood for analysis. They check your levels like cholesterol to see how healthy you are. The better your results come back, the lower your life insurance rate will be.
You will usually be asked some lifestyle questions to see if you do anything on a regular basis that would greatly increase the odds of a premature death. Activities like being a smoker, not regularly exercising, or being an avid skydiver could lead to higher rates.
Likewise, if you have a dangerous occupation like fireman or oil rig worker, your life insurance rates will be higher.
Lastly, your family's health history will be taken into consideration. Does everyone in your family die of a heart attack between age 50 and 65? Does diabetes run in your mother's side of the family?
These types of factors will be used to better assess your whole situation and assign a life insurance rate to you.