The mortality rate is a primary determinant of life insurance costs. These costs are attributed to identifiable risk groups. Those who do not pose additional risks to life insurers would obtain preferred premium rates. Anything else is considered a rated or standard premium. Age is the most obvious link to life expectancy. However, there are several other factors that are linked to life expectancy. One or more of the following factors could lead to your premium being higher than the premium of someone else with the same age:
1) Occupation: Some occupations present a greater risk of death than others. The categories include offshore workers, security officers and professional race car drivers. All risky occupations do not necessarily share the same level of risk either. Some would require twice the premium while others may require only a 50% increase. Occupational risk is determined by actuaries and is accepted at the discretion of insurers.
2) Sex: Due to their superior longevity, premium rates for women are always lower.
3) The applicant’s medical history and current condition: Underwriters consider one’s medical history and condition in determining the risk of accepting an application. A medically impaired life would be charged a higher premium. The insurer would then rate by charging a flat extra rate, a percentage of the normal rate or rating the applicant as if they are a few years older than their actual age.
4) Personal habits: Underwriters utilise detrimental habits such as smoking and lifestyle issues in determining the risk of an applicant. Drug users and other groups who have higher risks of contracting HIV are identified as high-risk groups.
5) Family history: A few people are surprised to learn that insurers consider the history of your immediate family at least. Even if the applicant is in perfect health, he or she may be rated if any member of their immediate family has or had a condition or disease. Underwriters use this information to deduce whether the applicant may pose a greater risk later on. Some conditions or diseases that may be genetically transferred may only manifest themselves at a late stage in life. The insurer may or may not rate a premium on the basis of one’s family history.
6) Possibility of travel outside of the country: Travel to other countries in the future may expose the insured to additional risks and communicable diseases. This information is normally provided on life insurance application forms. Insurers require disclosure of travel destinations, except for vacation purposes.
7) Hobbies or activities: Some people may have dangerous hobbies like skydiving or scuba diving that may expose them to loss of life or limb. This information is required by insurers to give them a fair idea of how many death options you have.
There are a number of reasons why your premium may be higher than the premium of someone else with the same age. Fortunately, insurers also include a disclosure provision where a favourable change in your habits or occupation, for example, can result in a reduced premium later. Knowing these factors can help you actively reduce the risk you may currently pose to an insurer.