How is the Cost of Life Insurance Determined?
You may have discovered that none of the people you know are paying the same for their life insurance. This may cause you to wonder about what your own costs for coverage would be. The reality is that life insurance companies consider a wide range of factors when determining how much your life insurance policy should cost you.
The insurance company itself has to spend money each month in order to keep itself running. And its clients are the ones who pay for the company's marketing, salaries, staff and the like.
Every insurance company, in order to have money available to pay claims must invest their money. If their returns are plentiful, then rates will go down, and you will pay a lower premium.
If this sounds a little morbid, that's because it is. The mortality costs is how much an insurance company pays to payout claims to their clients' beneficiaries. So what determines this cost? Basically, how long people live. In the United States, people have been living longer, which has means a decline in mortality costs.
But if only it were that simple. Mortality cost actually covers several factors, making it the largest influencer of life insurance premiums. This means that your health, age, gender, job, hobbies and even travel are considered. Why travel? Because depending on where you go, you are at different levels of risk, including disease and civil unrest.
Under health, which is filed under mortality cost, are several additional factors which determine how much you pay for insurance coverage. Included in these are whether or not you use tobacco, your blood pressure and cholesterol level and your family's medical history.
Your Desired Coverage
How much coverage you want will be another factor that determines how much you pay for life insurance. The higher your desired coverage, the more risk there will be to your life insurance company. That will result in a higher amount charged for coverage.
Can You Lower Your Life Insurance Costs?
With all the details that go into determining how much you pay, you may think there is no way to lower your life insurance costs. But the reality is that you can pay less each month by doing a few simple things.
Quitting smoking is the single most influential thing you can do to lower your costs for insurance, because smoking is linked to a number of health issues. The same is true for weight maintenance. You may be able to get your coverage for less if you have more than one type of policy with the same company.
Your risk-taking behavior will be taken into account when you apply for life insurance coverage. Be aware that companies will look at your credit score and even your driving record to look for this kind of behavior when assessing your costs.
The bottom line about how much you ultimately pay for coverage will depend on how beneficial you will be to the life insurance company financially.