Permanent life insurance: Continual protection
How life insurance rates are set
As with any type of coverage, life insurance rates are a simple expression of the financial risk you pose to the insurer. Anything that increases your chance of death, (and the likelihood your insurer will have to pay out) means a cost increase to you.
The big factors are age, health, and behavior.
Your Age.
The risk connection here is easy to see, and the effect of advancing age on premiums is unavoidable. Many insurers will not offer term policies to applicant 70 of age or older, although with rising life expectancies mean policies are becoming more wisely available to applicants throughout their sixties. A term life insurance policy will always be slightly more expensive for a man then it would be for a woman of the same age.
Your Health.
One big factor will be your and your family's health histories. If you have a serious or chronic health condition, obtaining an affordable policy (or even any policy at all) may be tough. If you have a family history of such an ailment, your premiums will likely be higher as a result.
Your health "profile" will also be of interest to the insurer. To earn a preferential rating, an applicant's cholesterol levels, blood pressure, and weight should all be within the range considered "normal" although a slight elevation in any one factor probably won't matter.
Your Lifestyle.
Any high risk or dangerous activity participated in on a regular basis means higher premiums. Smoking is the big fish here. It is virtually impossible for a smoker to earn a preferential rate, even with an otherwise pristine bill of health. The good news is, quitters' rates should fall with every year they manage to stay smoke free.
Alcohol use and abuse can also influence premiums. A history of abuse or alcohol-related law violations is especially serious, but heavy drinkers with elevated levels of liver enzymes may see higher premiums too.
But "bad habits" aren't the only high-risk behaviors punished with higher rates. Frequent participation in extreme sports, such as scuba diving, surfing, paragliding, or even mountain climbing can translate into higher monthly costs..
And keep in mind that life insurance premiums will always reflect the policy's term and death benefit. The longer the term, the larger the payout, the higher the cost.
A few variations on the theme
Term life insurance usually comes with its death benefit set in stone. But there are exceptions. Some insurers offer term life insurance policies whose benefits vary with the policyholder's needs.
Under such a set-up, both premiums and the benefit either increase or decrease over the life of the policy. So if you know your overall debt will be either increasing or rising over time, you can tailor your benefit to reflect that. Increasing benefit policies are more expensive than conventional plans, while decreasing benefit policies are less expensive.
