How are My Premiums Determined?
If you're like most consumers shopping for life insurance, you're looking to get the best rates on your policy. We all want affordable offerings and knowing how companies determine premiums is a get way to get started. Here's a look at some of the most common factors that providers use for deciding consumer premiums:
- As you could probably guess, providers use your health as a major factor in your costs. In fact, most companies request that you take a medical exam before approving you for a policy. Should they find any health concerns, such as high blood pressure or heart ailments, what you pay will be affected accordingly. Of course, there are online insurance companies that do not require a health exam, but still provide affordable options.
- Do you know if anyone in your family has a history of health problems, like heart disease or cancer? These days, many companies will want to know about your family's health history, as there's a good chance you could inherit some of their issues.
- Your age when applying for a new plan will play a big part in pricing considerations. Generally, those who get their plan while they are young have a better shot at getting a good price. If you wait too long, you can almost count on paying obscenely high costs.
- Another important factor when it comes your rates is the type of policy you take out. There's typically a big difference in premiums between term and whole life. Clearly, term offers the most affordable option for most consumers.
- If you're a smoker, then you probably already know how your habit can hurt your budget. Studies have shown that those who smoke are nearly twice as likely to pass away during their insured term. Obviously, life insurers have to make up for this major discrepancy by charging higher rates to smokers.
- Did you know that your occupation can have a major effect on what you will pay too? For instance, if you work in construction or handle potentially dangerous materials, there's a good chance your costs will be higher than others. Shopping between brands may help you find better pricing though.
- Depending on the insurer you work with and your specific policy, your credit score could have an impact on prices. Although it probably won't play a very big role, insurers obviously want to make sure that their customers can pay their amount owed in full and on time.
- Finally, the amount of coverage your policy provides will clearly affect your rates. If you want a policy that pays out a million dollars in the case of your death, you can expect it to pay the price for it.