Life insurance: the three main factors affecting your premium

User Written by Lynda Calver on July 07, 2015.

Life insurance: the three main factors affecting your premium

Life insurance premiums vary dramatically. To put it bluntly, certain factors will have a strong bearing on how likely you are to die and this will affect how much your life insurance will cost. The three main considerations that actuaries use to calculate your likelihood of dying are gender, whether or not you smoke and your age.

In most financial areas, women are still at a disadvantage to men, but life insurance is one area where we have the edge over them. Men pay on average 38% more than women for identical cover because the insurer is more likely to have to pay out on the man’s policy. Why? One reason is that the average American man will live 5 years less than a woman according to life expectancy figures published by the OECD. A second reason is that men are at a higher risk of contracting many forms of cancer, cardiovascular disease and more likely to suffer accidental injuries. Those higher risks transfers to higher premiums.

We all know smoking is bad for our health but it is also bad for our wallets and not just because cigarettes are pricey. Smoking could increase your life insurance premiums by up to three times depending on your age and gender. Smokers who want to make some significant savings should bin the cigarettes. If you stay smoke-free for 2 years, many insurers will lower your premiums to the non-smoker rate. A word of warning: do not be tempted to lie to an insurer if you do smoke. If you do so and die of a smoking-related cause, your policy could be declared null and void and payouts denied.

It is logical that the older you get, the more your life insurance will cost as you present a higher risk to an insurer. A 35 year old will pay on average 27% more than a 25 year old for the same cover. That is why I always advise my clients to take out policies while they are young, fit and healthy although obviously only the cover that they really need. Everyone’s needs are different and your requirements will vary with the number of dependents you have and your financial obligations. Term insurance policies are often used to cover specific temporary needs such as mortgage repayments over the term of a home loan or a college education for your children.

If you are unsure of how much cover you need, a financial advisor can help you work out your requirements and ensure that your family are sufficiently protected financially should anything happen to you. If you need assistance please get in touch.

Lynda Calver

Lynda Calver

Posted on July 07, 2015 in Insurance.