If you’ve gotten insurance policies in the past, you are no doubt aware that a number of factors are taken into consideration when determining your rates. Homeowners insurance, for example, may be based on the value of your home, the crime rates in your area, and the deductible you select. Auto insurance could be calculated by looking at the car you own, your driving history, and even the number of miles you put on your vehicle in a year. So it should come as no surprise that the rates attached to your life insurance policy will be determined based on a variety of input. But you may not be aware of exactly what insurance providers are interested in and how they come up with a number for your particular policy. Here are just a few of the factors they consider and how they could affect your life insurance rates.
Your age will play a major role in the cost of your life insurance policy, and unfortunately, there’s not much you can do about it. Just like taxes, death is inevitable, and the longer you live, the greater the odds you will die. Luckily, you can lock in low rates for life insurance by selecting a whole life policy when you’re young and sticking with it. The younger you are when you secure your policy, the lower your cost will be. Just make sure to pick a policy that has rates locked in.
Certain medical disorders in your family put you into a higher risk category for early death, and these could include cancer, diabetes, and heart disease, just for example. But your own state of health can also play a role, especially if you suffer from conditions like asthma, sleep apnea, depression, hypertension, and/or high cholesterol. Insurance providers may also factor in your weight and lifestyle choices such as smoking or drinking. Your best option to reduce costs on this front is to pursue a healthy lifestyle and make sure you’re in ship shape when you take the medical exam required for many life insurance policies.
Type of Policy
There are several different types of life insurance policies, but the two main ones are universal and term life insurance. All things being equal, universal tends to be the more expensive option, but you can generally lock in a rate at the time you select your policy and so long as you make your payments until the time of your death, you will enjoy coverage for your whole life. You may also find policies that allow you to borrow against your coverage. As for term life insurance, you’ll certainly pay less when you fall into a younger age group, but the cost of policies will increase as you get older. And when the terms expire (say 10 or 20 years down the line), you’ll have to renew or select a new policy.
Amount of Coverage
The final factor that will determine the rates associated with your life insurance policy is the amount of coverage you select. Policies can range from as low as a few thousand dollars – just enough to cover funeral expenses – to as much as several million dollars in benefits. You will have to decide how much coverage you need, but the amount you choose will certainly affect your rate. If you’re interested in seeing how different factors change the rates for a given policy, just check out a quote website like InsureChance.