How is the cost of life insurance worked out?

Most often, life insurance cost is based upon the individual’s gender, age and health status. Some insurance companies also take into account whether the individual consumes nicotine products (smoking or vaping), the individuals’ occupation and lifestyle activities and/or their family health history.

It is important for consumers to understand how the different factors can affect the premium they will pay so that they can make informed choices about the life insurance products they purchase.

Here is a quick guide to how the different factors can affect the price you’ll pay:

Gender – On average men pay at least 25% more than women (of the same age) for life insurance. This is due to the average life expectancy of a man being lower than that of a woman.

Age – With most life insurance policies as you age, your premiums rise. Waiting until you are older to buy life  insurance will always work out more expensive.

Health – As you can guess, the healthier you are the cheaper your insurance will be. Some insurance companies also require disclosure of any close family health issues.

BMI – BMI, or body mass index, has long been used as an indicator for level of health (with a higher BMI tending towards an increased risk of various health conditions). If an individual has a higher BMI they are likely to have an increased cost to their premium.

Smoking or vaping –  Usually insurance companies will ask if you have consumed any nicotine products in the last 12 months. If the answer is no, you are considered a non-smoker. If you answer yes, you will have an increased premium.

Occupation/Lifestyle – Certain occupations will result in increased premium costs to cover the extra risk that is involved. Similarly, the disclosure of certain higher risk hobbies can increase premium costs.

What can I do to decrease my premium cost?

Whilst no one can turn back time and become younger, there are some steps you can take to potentially lower your life insurance premium costs:

  1. Quit smoking – This will not only improve your health but also reduce your premium costs by up to half.
  2. Drink less alcohol – Whilst low levels of alcohol consumption won’t affect your rates, daily drinking will increase your premium costs. Consider drinking less alcohol to lower your premiums and your risk of alcohol related illness.
  3. Improve your fitness levels – As BMI levels tend to drop when you exercise/lose weight it makes sense to keep yourself fit and healthy to keep your premiums low.
  4. Review your level of cover – As your financial commitments decrease and your liability (e.g. mortgages) lessen, you will most likely require less cover. By reducing your level of cover, you can reduce your premium level.

Organising life insurance may seem like a daunting task. By considering the factors outlined above and having an idea of how you can keep your premium costs down, you can create a policy – and the peace of mind that comes with it – in no time at all. If you’d like to discuss options for life insurance to suit the needs of you and your family, or review your current policy please contact us for individually tailored lifestyle solutions.  

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