Family life is expensive. The average cost of raising a child starts at $233,610, and that’s not even counting college! Having the right life insurance policy in place means that your family will always have the care they need, no matter what.
However, it can be tricky finding the right policy when you don’t know what to budget for. To help make things easier for you, we’ve put together a list of factors that life insurance companies use to calculate premiums.
Read on to learn about the average life insurance cost, and how to lower it.
Table of Contents
Determining Average Life Insurance Cost
The average life insurance cost isn’t a one size fits all type of situation. Instead, several different factors will directly impact your policy premiums.
Here’s a shortlist of price-determining factors:
- Age
- Gender
- Health history
- Family health history
- Smoking
- High-risk activities or jobs
- Type of policy
- Coverage amounts
Since life insurance is a legal contract, you have to be 100% honest about everything you share with your provider. Disguising the truth, even a little bit, to lower your premiums will mean your coverages are no longer valid.
Life Insurance Rates by Age
If you look at an age chart with life insurance rates, you’ll notice that as you age the rates go up. It’s always a good idea to buy life insurance when you’re younger, to help keep the premiums lower.
Life insurance over 65 will be more expensive than life insurance over 45. However everyone, no matter what their age, can find an affordable policy if they know where to look. It doesn’t matter if you’re just starting, middle-aged, or living out your golden years, there’s a policy out there that’s right for you.
Women Pay Less
Worldwide, the average life expectancy resets right around 72 years old. However, research shows that on average women tend to live longer than men.
Remember, life insurance policies are all about calculating risk factors. If you’re at a higher risk of dying, your premium will be higher. As a result, women tend to pay less for life insurance policies than their male counterparts.
How BMI Affects Life Insurance Costs
Your body mass index (BMI), also plays a role in determining policy rates. Life insurance companies consider your BMI since your build is a major factor in determining mortality.
What exactly does BMI refer to? BMI is a score that gives a rough estimate of the types of tissues that make up your weight. Doctors use the BMI score to determine if someone has a healthy body build, or if they’re overweight.
Once doctors know you’re score, they’ll categorize you as being in 1 of 4 weight groups. The groups are underweight, normal weight, overweight, and obese.
Life insurance providers will review your BMI score, to determine if you’re at low risk (low premium) or if you’re a high-risk individual. If you are over or underweight, you can expect to pay more for your policy.
Don’t Crash Diet
You have to provide your height and weight when you’re applying for life insurance policies. When you go to take your life insurance medical exam, they’ll verify that you gave the right numbers.
While it may be tempting to go on a crash diet to drop a few pounds, it’s not a good idea. The life insurance company is going to review your medical history. They’ll look at what your trending weight is and go off that, instead of using your new lower weight.
Prescription History and Premiums
When your life insurance company reviews your medical records, they’re going to want to know your prescription history.
The way prescriptions affect your policy can seem unfair. Even if the prescription was temporary, or only used to treat a mild condition, it could still make things difficult. In some cases, a prescription history can raise rates, or even cause an application rejection.
First, the insurance company will determine what prescriptions you’ve ever used. Next, they’ll research the medical conditions that constitute using those prescriptions.
Life insurance providers look for the worst-case scenario and determine your relation to it. You might be taking the prescription for a mild symptom, but they’ll assume it’s the worst.
High-Risk Factors
High-risk factors are things life insurance companies consider to raise your mortality rate. For instance, your family health can be a high-risk factor if your family has a history of hereditary diseases.
Poor Driving Record
It may sound crazy, but your life insurance policy is also going to want to know what your driving record looks like. So if you’re a chronic speeder, and you’re thinking about buying life insurance, today might be the time to start slowing down.
By accessing the Department of Motor Vehicles, life insurance companies will be looking to see if you have any traffic violations. Luckily for you, driving violations won’t stay on your record forever. Depending on where you live, non-alcohol related violations can fall off your record after 3-5 years.
Being a Smoker
Another risk factor life insurance companies consider is smoking. If you’re a smoker, you’re instantly in a higher risk category for contracting fatal diseases, like cancer.
In some cases, insurance companies won’t accept smokers for any type of policy. It’s not all bad news though. If you quit smoking, you can always contact your insurance provider and ask them if you can get a rate reduction.
Dangerous Hobbies and Occupations
If you have an occupation or a hobby that puts your life at risk, you can expect to pay higher policy premiums. For example, if you enjoy sky diving in your free time, your life insurance policy will consider this to be a risk factor.
To help cover the cost of your higher risk, the company will charge you more for the entire policy. A hazardous occupation will also raise your policy rates. For instance, if you work around heavy machinery, this could cause your rate to be higher.
Study Your Life Insurance Company
It’s clear to see that your life insurance company is going to want to learn a lot about you. Nonetheless, while it’s important to maintain absolute honesty, that doesn’t mean that it’s a 1-way street.
You should also be learning as much as you can about a potential life insurance carrier. For starters, find out about the financial strength of the company issuing the policy. Make sure they’re an institution you can rely on, year after year.
Next, read online reviews to see what customers have to say about working with that company. Look for what customers are saying about how easy or difficult it is to communicate with the company.
Finally, compare life insurance quotes you receive with their competition. Look for a premium that fits within your budget, without compromising the reliability of the company. While you’ll want to lower the average life insurance cost you’ll pay, don’t do it by choosing a questionable company.
How to Lower Your Life Insurance Premiums
Now that you know the factors that can raise your rates, let’s look at how you can lower your life insurance costs. First, you can start by checking your records on your own time.
Reach out to your current and past health care providers, and begin gathering your medical records. While we do live in a modern world, it’s not free of mistakes. As you begin gathering your records, you’re likely to find mistakes.
For instance, you might see that a doctor lists you as taking a prescription that you’ve never had in your life. Fixing these discrepancies and errors will go a long way towards helping you get the best price point.
Next, look for companies that will work with the records you have. For instance, let’s say you have diabetes. While one company may raise your rates drastically, another may be more lenient.
It’s a good idea to reach out to an independent agent, that can provide you with multiple quotes. Ask them to narrow down their search for a company that’ll be lenient towards whatever high-risk factors you’re dealing with.
Finally, taking the medical exam can be more cost-effective than getting a simplified issue application. Instead of assuming the risks you’re facing, the medical exam will shed light on the truth. Oftentimes, taking the exam can lower your policy premium significantly.
Find Your Policy
Now you know what goes into figuring out the average life insurance cost. Do you have any high-risk factors in your life? What things could you do, like quitting smoking, to help lower your risk factors?
We hope that our article was able to introduce you to the life insurance buying process. As you get ready to take the next step, remember to be patient. Don’t start a policy until you’re certain it’s the right policy and the right company for you!
Are you ready to find out about more ways to prepare for the future? Go ahead and read another one of our articles.
