Did you know? In 2017, only 41% of American adults were protected by a life insurance policy. Unfortunately, even those who do have coverage often don’t have enough. The average life policy is underinsured by over $300,000. What’s really scary is that many people completely opt out of life insurance because of the perceived costs and confusion involved. Still others have found that they couldn't be without their life policy. To them, insurance is far from an unwanted expense—it's a valuable investment. Why? Because life insurance can make your family’s future dreams, plans, and goals achievable. That's a point of view we share, and we're happy to say that finding the right policy doesn't have to be an impossible task. So, just how is the price of life insurance determined? Here are the factors we’ll break down for you:
Gender & age
Smoker or non-smoker
Current health conditions
Personal medical history
Family medical history
Hobbies & travel
Credit score, driving & criminal history
Type of life insurance
Size of death benefit
1. GENDER & AGE Statistically, women have a higher life expectancy than men–by nearly 5 years–so that automatically means lower premiums for the ladies. (Sorry, guys.) Here’s the bottom line: the longer you live, the longer the policy lasts, so the lower your monthly rates will be. Age has been described as “probably the single primary factor that determines your life insurance premiums.” Getting up in years naturally shortens both your lifespan and the term of your policy. As a result, premium costs will spike. If you’re 65 years or older when you apply for life insurance, it’s doubtful that the company would accept your application. Even if they do, your premiums would fly through the roof. To get the best rates and a level monthly premium, it’s better to buy life insurance before you turn 35. Plus, you’ll probably be able to skip the physical exam when applying at a younger age. How to save: Most of the above factors are beyond your control. So our best advice is to be proactive in finding life insurance. Be an advocate of good health among family and friends. And even if your age isn’t the ideal number from a company’s point of view, doing all you can to keep yourself well could earn you savings on your life policy. 2. SMOKER OR NON-SMOKER It shouldn’t come as a surprise that this factor weighs heavily on the price of life insurance. That’s because smoking dramatically increases the risk of serious–and often fatal–health conditions such as lung cancer or COPD. And since chewing tobacco brings its own set of major health risks, it's also an activity that will raise rates. According to one insurance expert, a smoker can expect to pay two to four times as much as a non-smoker. Where life insurance is concerned, cigarettes will burn holes in your wallet. Even after quitting, it may take a couple of years for insurance companies to recognize you as a non-smoker. But when that happens, you'll be sure to see a payoff for all your efforts. How to save: We know it's often easier said than done, but avoid smoking or chewing tobacco. If you never start the habit–or if you kick it early–not only will your health improve, but you'll also save oodles on life insurance. 3. CURRENT MEDICAL CONDITIONS This refers to chronic health concerns, such as high blood pressure, high cholesterol, obesity, diabetes, and alcoholism. All of these conditions–especially when combined–put your life at a considerable risk and up the cost of your policy. That’s why insurance companies often require a physical exam and your current height-to-weight ratio when considering your application. While there are some life policies that may be available to those with a terminal illness, premiums can be preclusive. How to save: Talk with your doctor about how you can improve your health, manage current conditions properly, and work to prevent future illnesses. And for those of you who enjoy generally good health, the time to get insured is now. We’d also recommend that you discuss your situation with a licensed agent who knows what options are available to someone in your shoes. 4. PERSONAL MEDICAL HISTORY Conditions you had in the past affect your current premiums as well. Here's a positive note: if a health event wasn't severe and a fair amount of time has passed, it may not hold too much weight. Regardless, insurance companies will want to know the details of your past and current conditions, along with your family’s medical history. Since your answers directly affect the price of your policy, be as truthful and accurate as you can. To help jog your memory, keep up-to-date notes on your health and habits–exercise, diet, and other routines. How to save: While you can’t change your health history, you can change your health future. By improving your lifestyle and joining wellness programs offered by your life insurance company, you may be eligible for discounts. 5. FAMILY MEDICAL HISTORY When it comes to your family’s health, insurance companies are most concerned with the medical history of your immediate blood relatives, especially those who didn't make it to age 60. Since you could have genetic predispositions for the same health conditions, a life insurance company would naturally take this into account when determining if you'd be a good fit for a policy. How to save: Encourage your family members to maintain a healthy lifestyle and follow suit. Be fully informed of your family’s health history and take preventive measures–such as regular checkups with your doctor–to reduce the risk of developing any conditions that may run in your family. 6. OCCUPATION Some jobs are hazardous by nature. Firefighters, police officers, pilots, truck drivers, and construction workers fit this category. The higher the chance that you could get hurt or fatally injured on the job, the more your life policy will cost. How to save: If your job is hazardous, always follow safety regulations and protocols to protect yourself from harm. Ask your employer if the company offers any special deals on life insurance. And be sure to consult with an experienced life agent. They may be able to find an insurance company that understands the risks involved and is happy to work with folks in your industry. 7. HOBBIES & TRAVEL While skydiving and rock climbing may give you a thrilling rush of adrenaline, they also carry a high rate of accidental death. You've probably noticed a trend by now–more danger = more expense. Likewise, venturing outside of the U.S. into hazardous areas increases the chance that you’ll get sick, injured, or worse. Exposure to serious disease, water- or food-borne illness, civil unrest, and war are just a few serious risk factors. How to save: If you choose to participate in a dangerous activity, take all possible safety precautions. Give your life insurance company a heads-up if you plan go out of the country, including the dates and specific places you will visit to avoid hassle in the event of a claim. Avoid traveling to dangerous areas unless absolutely necessary. 8. CREDIT SCORE, DRIVING & CRIMINAL HISTORIES As with every type of insurance, credit score ranks high on the list of factors that affect the price of your life policy. It reveals how inclined you are to take risks. The same is true of driving and criminal history. Did you know? Your life insurance company can access your Department of Motor Vehicles records to determine whether or not you’re a safe driver. An accumulation of speeding tickets, accidents, and DUIs would make anyone pretty risky to insure. If past crimes are severe–and especially if they merit probation or jail time–a life insurance application wouldn’t even be considered. How to save:
Remember: higher credit score = lower insurance premium.
Since the last 3 to 5 years of driving matter the most to life insurance companies, you could improve your driving habits and benefit from a lower premium.
Do your best to be a law-abiding citizen.
9. TYPE OF LIFE INSURANCE There are two types of life insurance: term and permanent. The most common type–and often the most affordable–is term life insurance, which lasts a set period of time (typically 10 to 30 years). Term life must be renewed before the term ends to maintain protection, and renewal costs will likely rise from one year to the next. Monthly premiums stay predictably constant, but benefits to heirs will decrease over time. Permanent life insurance lasts your entire lifetime, as long as policy terms are met. Initially, it costs more than term life insurance because it is a lifelong policy. But it comes with some sweet benefits. Depending on the kind of permanent life policy, you may be able to build up a stash of tax-free funds to use during your lifetime. Think emergency money, retirement savings, and supplemental income–all potential options with permanent life insurance. How to save: Discuss with your agent which type of life insurance policy is both affordable and in the best interests of you and your family. Consider buying a life policy (if available) from the insurance company you already deal with for home or auto protection. Be sure to ask about bundling discounts. 10. SIZE OF DEATH BENEFIT Death benefit is the amount of money your loved ones receive when your policy comes into effect. Logically, the more your beneficiaries stand to inherit, the higher your premium will be. To ensure that you're not stretching beyond your means, an insurer will take current income into account when settling on a realistic benefit amount. How to save: Your agent can help you to determine the right amount of death benefit for your situation. With a little guidance, you'll be able to provide loved ones with a secure future while still keeping costs reasonable. The Bottom Line Clearly, there’s a lot to think about when settling on a life insurance policy. You understandably want as much protection as possible for your family, both now and well into the future. But with so many moving parts, things can get confusing. So if you’re feeling overwhelmed, we understand–this is heavy stuff. That’s why we’re right here with you. Zinc’s agents are friendly folks who are ready to use their skill sets to lighten your load. With the right guidance from an expert at your side, you can enjoy life insurance now and invest in your family’s long-term success. Get in touch with our personal lines agent Mike Kervel to learn how peace of mind is just around the bend.