By Joel Dansby* on Oct 27, 2020


Health Factors

Your health condition and history, including your family’s history is the biggest factor used to determine your rate.  Life insurers have actuarially determined which health conditions present the greatest risk and will apply premium ratings or simply decline coverage accordingly.  But even if you have some conditions you shouldn’t be discouraged, as each company uses different standards in assessing risk and applying ratings which is why it is important to look at several companies when applying for coverage. 

Many health factors can be controlled or modified to the extent that it will earn a more favorable rating. The obvious one is smoking which can increase your insurance cost by as much as 50%. Most insurers want you to be smoke free for at least 3 years before they will issue a favorable rating. Weight is another big factor. Sometimes it could be just a matter of a couple of pounds that could push you into a higher rating class. 

Many companies provide some underwriting guidelines on their websites so you can see into which ratings class your height and weight fits.  Hypertension and cholesterol levels are determinants that you may also be able to influence by changing your diet or kicking up your exercise  before applying.

By working on these measures prior to taking a medical exam for life insurance you could greatly influence the rating that is applied by the insurer. Additionally, your could take some steps right before your exam to improve your rating, such as fasting for a day which could help to lower your cholesterol. Or, avoid alcohol, fatty foods, caffeine and sodium intake 24 hours before the exam.  Also, it’s not a good idea to exercise to soon before an exam. Most importantly, get a good night’s sleep.

Lifestyle Factors

Life insurers also consider the way you live and how hard you live in their assessment.  In addition to asking a lot of questions about your activities, hobbies and occupation, they will check your background including your credit and your driving record.  Any indication that your lifestyle introduces additional risks to your health will generate a higher rating.  If you have a lot of violations or accidents on your driving record you will pay a higher premium, so you may want to wait until some of them fall off your record.  Lifestyle or hobby choices such as dangerous sports, driving motorcycles, or raising poisonous pythons may lead to increased insurance costs.

How Much Life Insurance You Buy

One of the easiest ways to control your life insurance costs is to make sure you buy just what you need.  Some people buy life insurance based on some general rule such as 10 times income.  That’s not advisable because it is likely to lead to either insufficient coverage or excessive coverage. The only way to know exactly what you need is to do a thorough assessment of your family’s needs, calculating the cost to replace income, pay off debt, and pay for future obligations.

Also, it is important to note that insurance premiums are often discounted at different coverage thresholds. For instance, a $1 million policy may cost less than a $850,000 policy due to a premium break at the million dollar threshold. You can find premium breaks at $250,000 and $500,000 thresholds with some insurers.

How You Pay for Life Insurance

Many people pay for their life insurance policy through monthly payments or automatic drafts from their bank account. While this is certainly a convenient and cash flow friendly way to pay, most insurers charge a fee for this privilege. You can lower your annual life insurance cost by as much as 10% by paying in one annual installment.

Shop and Compare

Life insurance rates have come down sharply in the last decade, and competition among life insurance carriers has grown fierce, especially with the ability to shop and compare online.  It’s easy to compare premiums between dozens of carriers.  But, premium is only one, and perhaps the least important point of comparison. Just because one company’s premium is lower than another based on your age and general health, the underwriting standards can vary widely between companies.  So, one company can offer a better standard premium rate, but it may be more difficult to qualify for it based on their underwriting guidelines.  Some companies may promote an extremely competitive “super preferred” premium rate, yet less than 1% of applicants can qualify. 

Companies view such things as height-weight ratios, hypertension, cholesterol and other maladies differently.   It could be a very arduous process to search, review, and understand how each company addresses these underwriting issues. Your best course of action might be to work with a trusted insurance professional who has access to a wide range of different carriers. They will know which carriers would be the best to work with based on your particular needs or health condition.
