When it comes to obtaining proper life insurance, Canadians report that the rates are too expensive and that their other financial priorities hold them back. In fact, a 2020 LIMRA Insurance Barometer showed that 67% of uninsured respondents said that life insurance is too expensive. The real question is “Is life insurance really expensive?” and if so what affects the premium rates?
Despite popular beliefs, life insurance is often far cheaper than most people imagine. When determining life insurance rates, insurance companies must consider several factors, including age, gender, lifestyle, and health. You will complete a questionnaire and submit a health screening to help them determine their risk factor. The higher the risk for the insurer to cover your life, the higher your premiums.
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Let’s look at all the factors that will affect your insurance rates:
What is your age?
Your current age and life expectancy will determine whether you will pay lower or higher monthly premiums. As a rule, younger people are healthier with fewer possibilities of dying statistically, hence the lower rates. However, your age will also determine the coverage amount and the length of the insurance term. For example, some companies stop offering term life insurance to people over 80 and permanent life with a cash value at age 85.
What is your gender?
Statistically, women live, on average, five years longer than men. Therefore, the death benefits paid out for life insurance are often sooner for men, making it more expensive to obtain coverage. Women can expect to pay less.
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What is your health condition?
Certain health conditions make it riskier to insure you, so you can expect to pay more. These include diabetes, cholesterol, diabetes, and high blood pressure. In addition, when you apply for life insurance, the insurer will ask for a medical examination and access to your medical records and prescriptions. The insurance companies will start with the standard questionnaire to take the typical medical history of the applicants. Depending on your age and the amount of insurance you are applying for, the insurance companies add paramedical testing as a requirement where you will be asked to complete a blood and urine test.
After the age of 60, you can expect most insurance companies to order an APS report in addition to all the mentioned tests and questionnaires. The APS report or the attending physician report includes the insurance company underwriting team to ask your family physician to complete the set of questionnaire forms and send the relevant medical information to the underwriting team; this includes the results of your medical test, conditions, diagnosis, and the notes from a simple doctor visit. The question they are trying to answer is “what is the likelihood of death for the applicant?”
Here are examples of the most routine factors insurance companies dive into:
Your Medical History
Your past and current health problems, treatments, and prescription medications indicate to the health insurer how healthy you are.
Height and Weight
Your weight according to your height is another indicator of the state of your health. Your medical examination will also include your body mass index (BMI) -the measure of your body fat.
If you smoke cigarettes, drink alcohol, or use drugs, you fall into a riskier group than those that don’t do any of these.
Family Health History
Many conditions like heart disease, diabetes, and cancer are hereditary, and the insurer wants to know if your parents or siblings have any of them.
Several insurers have non-examination life insurance, but you can expect to pay more for the risk to cover your life, especially those policies where you don’t even fill in a questionnaire.
How Does Your Lifestyle Impact Your Premiums?
Yes, your lifestyle can impact the cost of your life insurance premiums. Here are some of the facts you can expect your insurer to try and determine from your application:
Do you maintain a healthy lifestyle by staying active and with your diet?
People without pre-existing medical issues pay less life insurance premiums than those with high blood pressure, diabetes, high cholesterol, etc. Moreover, the better your BMI, the lower your premiums.
What is your driving history?
People with a history of driving under the influence, convictions for reckless driving, and suspended licenses are considered irresponsible and high-risk clients. You can expect to pay higher car and life insurance if you have committed any such driving offences.
Do you have a criminal record?
People on probation, awaiting trial, or in jail generally get declined life insurance coverage because of the risk. Insurers base their decision on the fact that people with criminal records have a shorter lifespan than those who don’t. However, once a certain amount of time has passed from when charged, there are several options available, with some insurance companies charging a flat fee for every $1,000 of coverage.
Do you work in a dangerous occupation?
In some occupations, hazardous duties lead to higher life insurance rates. Therefore, people in high-risk professions include:
- Firefighters
- Police officers
- Pilots
- Builders and cleaners working on tall buildings
- Working in war zones
- Chemicals and explosives workers
- Underground work
What are your favourite hobbies?
If dangerous activities take up your hours of relaxation, you can expect to pay higher life insurance rates because of the higher risk. Risky hobbies include scuba diving, flying planes, bungee jumping, drag racing, sky diving, and travel. Yes, travel is a high-risk activity, thanks to animal encounters, viruses, higher crime, etc.
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Conclusion
Besides your age, gender, occupation, and lifestyle, the type of life insurance policy, coverage amount, and term will also affect your insurance rates. Generally, term life costs less than permanent (or whole) life insurance. But, of course, you can add some insurance riders to an existing policy to fill gaps in the coverage, like a premium waiver in case of a disability.
The higher your risk to the insurance company, the more you will pay for your family’s financial protection. You don’t need to live a secluded life, but you must be honest on your application and abide by the limitations and rules of your insurer.
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