How are insurance premiums calculated?

Insurance companies take a risk when they take out a life insurance policy on you. We all know that. The thing is that the premiums that they charge may contain pre calculations to cover them should you die early. This way the insurers do not have to pay a larger death benefit to your beneficiaries than you paid in monthly.

The risks that insurance companies fear are those that could cause you to die early. Existing medical conditions that may get worse in the future are one concern. Tobacco and alcohol use, being overweight, high cholesterol, and poor health are other concerns. A status will be applied to your health, either standard or preferred. This is not only based on your health, but age and gender as well. These factors will determine how much your premiums will be through your chosen life insurance company.

To make sure that the life insurance company knows all the risks that are involved with you and your lifestyle, a questionnaire concerning your health and lifestyle will be given to you. You must fill out the questionnaire with complete honesty. All doctor’s visits, dates, names, diagnosis, and treatments must be provided. A hidden medical condition can become a problem for you if you were to die because of that particular condition. An insurance company will not pay death benefits to your benefits for a condition that they were unaware of. Even if you just lied about the condition and the insurance company found out, they could cancel your policy.

Not all factors that insurance companies look at are under your control. Your age and gender are examples of those. Someone who is younger is going to pay less (a low cost life insurance policy is possible) than that of someone in middle age. Women live longer, generally, so their premiums tend to be lower than men’s. Lifestyle comes into play if you are a thrill seeker. People who participate in adrenaline driven activities tend to pay more on their premiums than the average person. These include bungee jumping, deep sea diving, or sky diving. Those who have a profession involving race car driving or instructing mountain climbing or sky diving would also be subject to higher rates.

After the initial life insurence questionnaire, a physical exam may be required. This gives the insurance company all necessary information about your health before they sign you up as a policyholder. It is similar to a routine checkup, but may also include a few extra tests. Blood may be taken or a urine sample may be asked of you. Both of these tests can find illegal drugs in your system or HIV. Sometimes an EKG is performed to check your stress levels.

Factors that concern a life insurance company can be put to a stop or slowed down. You may decrease the amount of cigarettes that you smoke daily or lose weight. If you have a medical condition, like diabetes, then you may have to monitor and control the effects of it before the company will lower your monthly premiums. It can be done. All it takes is will power, documented progress, and a wish to save money on your life insurance and perhaps your life.