Premiums reflect the amount you should expect to pay each month for your life insurance policy. This should be a major factor when deciding what policy is best for you because there are certain aspects that will shape the price range of your premiums. Most insurers take the same sort of personal information into account:
Type of Cover
The type of policy on which you decide will be the foremost factor in the calculation of the premiums. Premiums on a term life insurance policy, for instance, will likely be lower than those on an endowment insurance policy because the latter guarantees a pay-out while the former does not.
Amount of Cover
The amount of specific cover that you wish to take out will also affect the level of your premiums. The more insurance you purchase, the higher you can expect the life insurance premiums to be.
Age is taken into account in the majority of life insurance policies. This is especially notable when deciding on something like over 50s cover. Those who are young and healthy pose less risks to insurers and are, therefore, often the ones that qualify for lower life insurance premiums.
Term Insurance – Your decision on provider may be determined by the fact that you are offered a renewal or conversion policy, matching that of your existing policy at the end of the term. You will inevitably be older at the end of your first term, so you may benefit from this in terms of your premiums.
Whole of Life Insurance – This can be fairly expensive when taken out at a later stage in life, which is why more and more young applicants have been seen in recent years.
Endowment policies – These are known to be considerably more expensive than other policies as cash is paid out whether death occurs or not. This means that age of applicant isn’t a significant factor in the calculation of the premiums.
Gender, for a long time, was a variable in premium costings as women, on average, live longer than men. However, from December 2012, the European rule that outlaws gender discrimination will come into place meaning that there will be no difference in premium price between men and women.
Smoking – It is common practice for life insurers to ask you about general health problems and smoking usually crops up in the first question. Smoking is likely to have a detrimental effect on your life insurance premiums.
Occupation – A stunt man, for instance, will have a more accident prone life than the average office worker and any occupation that falls into the ‘dangerous’ category of work such as race car drivers will see their premiums rise. This is calculated differently from company to company but the policy type most effected by occupation is term insurance as you are more likely to be working during a term policy rather than a whole of life or over 50s policy, for example.
Hobbies – Extreme sports such as skiing, sky diving and rock climbing will see your premiums rise in nearly every policy. Mortgage protection and income protection would probably penalise most for this type of activity as they cover you for injury and/or death.
If you already suffer with an illness, this will always be taken into account when it comes to life insurance. The policies that a pre-existing illness is likely to affect most are those that pay out only in the event of death, such as term policies and, of course, those that are designed to cover your household costs during a recovery process such as mortgage and income protection plans, as well as critical illness cover.
If there is a history of illness in your family, especially those diseases that are particularly hereditary, this will be a factor that insurers will take into account. These aspects will factor in on the same type of policies as pre-existing illnesses such as critical illness insurance, term policies and mortgage and income protection plans. Family history, however, is not normally as significant a factor as a pre-existing illness.