When determining the cost of a life insurance policy, insurers look at several factors that impact your life expectancy. While you cannot control your gender, age, and family history, other lifestyle choices can lead to higher rates. Discover what life insurance companies review that could lead to higher premiums.
Life insurance companies base premiums on factors that impact your life expectancy.
Factors that can raise your rates are based on demographics, health, family history, and life choices.
The type and amount of life insurance policy also impacts your premiums.
What factors impact the cost of your life insurance premium?
Life insurance underwriters look at several premium rate factors that impact life expectancy and how that will affect their risk of paying out on a life insurance policy. Below are ten determinants an insurance company will review.
1. Your age
The younger and healthier you are, the longer your life expectancy. Life insurance policies cost less the younger you are. Some policies even have an age limit, canceling once you reach a certain age. While some companies offer high-risk life insurance policies to seniors, these policies generally have a lower payout limit and are often significantly more expensive. Some specific programs do offer seniors affordable, high-risk life insurance.
2. Your gender
Men statistically live about five fewer years than women, which is enough to affect life insurance premiums. When all other factors are the same, men pay more in life insurance premiums than women.
3. Your habits
Most life insurance policies require a simple physical, which includes a blood and urine test and a medical interview. These tests examine several indicators, including tobacco, drug, and alcohol use. They also look at your past medical records and prescription drug use.
While it may be tempting to lie about certain habits, withholding information is considered insurance fraud. Also, you are protected by the Health Insurance Portability and Accountability Act (HIPAA), which means the life insurance company cannot report its findings to your employer, the police, or anyone else without your permission.
- Tobacco use. This is a known risk factor for several life-threatening conditions, including lung disease, cancer, Type 2 diabetes, and heart disease. Nicotine use – whether from smoking, chewing, vaping, or even nicotine patches or gum – will require higher premiums. If you smoked in the past but quit, life insurance companies typically require you to wait at least one or two years before you may qualify for the non-smoking rate.
- Drug or alcohol use. Are habits that can also impact your life insurance premium. While drinking in moderation may not affect your health, excessive alcohol use can and can be an indicator of reckless behavior. When applying for a policy, you will be asked about your drug and drinking habits, including if you have been treated for drug or alcohol abuse or if you've had a DUI or DWI. Your blood test will look for carbohydrate-deficient transferrin, a common indicator of heavy alcohol consumption in the previous two weeks. For drug use, the life insurance company will want to know what kind of drugs you used, when you used them, and how often. Whether drug use affects your life insurance policy varies by the specific use.
- Obesity. This is another factor that can impact life insurance. Because being overweight can contribute to serious health conditions, your body mass indicator (BMI) will be considered when applying for life insurance. However, it won’t be the only issue. If you are overweight and have other health considerations such as high blood pressure, high cholesterol, or a family history of heart disease or diabetes, your weight may play a more significant factor in underwriting.
4. Your health
Different health conditions impact life insurance rates and eligibility. For example, while high cholesterol may raise your rates, a cancer diagnosis may prevent you from qualifying for certain plans. There is, however, life insurance for high-risk individuals in many cases. Life insurance companies also look at your history of mental health disorders. Some disorders, such as severe depression or anxiety, may increase your rates or disqualify you from certain plans. While most life insurance policies require a simple physical, insurance providers look at increased limit factors when determining rates for more extensive policies and require a more thorough physical.
5. Your family's medical history
Certain genetic predispositions can impact life expectancy, and life insurance companies take family medical history into account when determining rates. Some health concerns include a family history of cancer, heart disease, diabetes, Alzheimer’s, and others. These factors alone generally don’t prohibit your ability to get life insurance, but they could impact your rates.
6. Your job
Some careers naturally come with higher risks of injury or death. Examples include police officers and firefighters, construction fields, grounds maintenance workers, airplane pilots, truck drivers, and trash collection workers, among others. With some careers, life insurance premiums may be higher, and certain riders, i.e., extra coverages for specific events, may not be available. For example, certain careers may not qualify for disability riders that provide coverage if you are injured and become disabled.
7. Your hobbies
If you regularly participate in certain risky extracurricular activities like skydiving, scuba diving, flying, rock climbing, motorsports, and others, your life insurance rates may be higher. Life insurance policies have a "period of contestability," generally the first two years after the policy is issued, that the life insurance company can investigate if you die. The reason is to prevent misrepresentation or fraud in the policy application. It's better to be honest about these activities than to not have a policy pay should you have an accident.
8. Your driving record
insurance companies will request a copy of your motor vehicle report, which
provides a history of recent violations. Multiple speeding tickets or a recent DUI
may lead to a high life auto risk premium.
9. Your background check
Data indicates that individuals with felony records generally have shorter lifespans. While insurance companies do take into consideration the type of felony committed if you are convicted of a felony, you may be unable to obtain life insurance for a set period of time, and your rates may be higher than they would otherwise.
10. Your finances
Your credit score does not directly impact your life insurance premium, but the issues that affect your credit score may. Bankruptcy, in particular, can lead to higher premiums or denial of coverage.
Which of these factors do not play a role in the underwriting of a life insurance policy?
While each of the 10 factors listed can contribute to increasing life insurance rates, there are two additional factors that affect rates but are not related to risk: the type of insurance policy and the amount of the death benefit. Naturally, the more life insurance you carry, the higher your premium will be.
There are two main types of life insurance: term life and permanent life insurance.
- Term life insurance policies are significantly less expensive. But they have to be renewed after a predetermined set of years, or "term." While the most popular term lengths are 10, 20, or 30 years, some companies offer additional options, including annual policies that renew at a higher rate every year. Once the specified term is completed, you may be able to renew your policy at a higher rate based on your age, cancel your policy, or in some cases, you can convert your policy to whole life. Term life insurance policies usually also terminate when you reach a specified age; again, you may be able to roll the policy over into a whole life policy at a higher rate.
- Permanent life insurance policies are more expensive. But they generally last a lifetime. Some policies also build tax-deferred cash value that can be used later in life for things like college expenses, buying a house, retirement, etc. Depending on the type of permanent policy, your premiums may never increase no matter how long you have your policy.
To learn more about the differences in policies and rates, speak with a reputable life insurance agent to determine the right policy for your needs and budget.
What factors affect the price you pay for life insurance?
Your life insurance policy premium will vary based on several considerations. In addition to the type and amount of life insurance policy, insurance underwriters look at factors such as age, gender, health, job, hobbies, driving and criminal records, and alcohol, tobacco, and drug use.
What causes the cost of life insurance premiums to increase?
While several factors -- like age, tobacco use, hobbies, family medical history, and others -- may cause you to have higher premiums when you first take out a life insurance policy, only age will cause your premiums to increase once a policy has been issued. For example, a 10-year term policy will have to be renewed every 10 years, and the rate will be higher due to your increased age. With whole-life policies, however, your premium doesn't increase. Other policy premiums, such as with universal life, may increase or decrease within a pre-specified range based on the current market.
How can I avoid insurance an premium increase?
Before taking out a life insurance policy, improve your health and end bad habits, like stopping tobacco, losing weight, and waiting until your driving record is clean. Once you have a policy, the only way to avoid a premium increase is to take out a policy, like whole life, where the premiums never increase.
- Center for Disease Control and Prevention. Mortality in the United States, 2021.
- Social Security. Actuarial Life Table.
- NIH National Center for Biotechnology Information. Carbohydrate deficient transferrin and alcoholism.
- Centers for Disease Control and Prevention. Health Insurance Portability and Accountability Act of 1996 (HIPAA).
- National Heart, Lung and Blood Institute. Calculate Your Body Mass Index.