Calculating Life Insurance

Insurance companies have different methods to calculate the premiums that people pay for life insurance. The most common methods are using the smoker status of an individual, their body mass as well as their age. The cost of life insurance can change depending on the type of policy and how the renewal is setup.

One method that insurers use to calculate the premiums that people pay for life insurance is using what is called a smoking status. The smoking status can vary from insurer but it consists of a standard smoker, abstaining from smoking and abstaining from tobacco products. A standard smoker is a person that currently smokes cigarettes. Abstaining form smoking means not having smoked cigarettes for a specific period such as one to two years. Abstaining from tobacco use means not having used any tobacco products within a specific period such as one to two years. One thing to keep in mind is that a person can abstain from smoking cigarettes but still use other forms of tobacco.

Another factor that insurance companies use to calculate the cost of life insurance is the age of the insured at the time the policy is purchased. Usually, the older a person gets the greater the premium will be for a life insurance. It is best to always get a life insurance policy when individuals are young because they are generally in better health and will get better rates for a policy. Insurance costs more for older people because of the way the life insurance companies determine mortality rates. Insurers have calculations and charts that show general life expectancy based on a person’s current age. This is why it is more expensive for an older person to buy a new life insurance policy.

A person’s body mass or height and weight is also used as a factor to calculate the amount or premium that is being paid for life insurance. People that buy life insurance come in many different sizes. Some are small and petite and other are tall and very large. Usually, the heavier an individual is compared to their height is seen as a greater risk. Usually, a person’s size is compared to an index of heights and weights to see where an insured fits in the scale. If they are too heavy compared to their height than they may pay more for their policy. There are also general health questions that relate to a person’s health such as blood pressure and pulse.

Depending on the type of life insurance policy and how the renewal is setup the costs of the premium can vary. Usually, a whole life policy has a set premium for the life of the policy. A term policy has this as well but the policy will expire at the end of the term and a new policy will need to be setup if it is needed.