Life Insurance: Unexpected Cost and Eligibility Factors
(FinancialHealth.net) â Do you have life insurance? Is it enough? Nearly 60% of people in the U.S. have some type of life insurance, but 20% of those admit they donât have enough to cover the anticipated expenses after they pass away.
So whatâs stopping people from buying a policy â or raising their coverage amount? In a word: money. Letâs take a look at what goes into determining the cost of a policy.
Your Health Matters
By far, the biggest cost determination factor for a life insurance policy is oneâs health. Many insurers will require a health exam before deciding if a person is even eligible for coverage, especially if they are looking for a larger policy amount.
For example, an insurance company may take a closer look at someone over the age of 40 looking for a $100,00 policy as opposed to those looking for less coverage. Most companies will ask some basic health questions no matter how much coverage you are requesting, even if they donât require an exam.
Some health conditions are more obvious risk factors than others for insurance companies to take on. People with ongoing medical conditions, like diabetes or high blood pressure, have a lower life expectancy. The insurance company is more likely to have to pay out under your policy, so the premium rates are going to be higher.
Some health factors are considered high-risk but arenât as obvious. These include things like the medications a person takes, their weight, whether or not they smoke, a history of depression, and a history of high cholesterol.
Certain pre-existing conditions, like cancer or heart disease, may even lead to a complete denial of coverage for most insurance companies.
Itâs Not ALL About Your Health
Insurance underwriters take a number of other factors into consideration when determining a personâs eligibility and the cost of the policy. An individualâs age is always a factor, even if they are healthy. The length of time a person is expected to live impacts the chances of a company paying off on the policy. The higher the chance, the higher the premium.
While most people donât think their driving record is important, underwriters think it speaks volumes about a personâs habits and lifestyle. If someone is reckless behind the wheel, their chances of dying in an accident are statistically greater than those of a safe driver.
Other factors that impact premiums include:
- Family history
The Bottom Line
When looking for new or additional life insurance, itâs important to remember that eligibility and policy costs are based on a complex algorithm of statistics. Health and other factors lead to a higher or lower risk of a payout by the insurance company, and policy costs will reflect that risk.
To minimize the impact of some of these factors, make sure any health conditions, like cholesterol levels and asthma symptoms, are well under control. Maintaining a healthy weight and avoiding dangerous hobbies can also help lower monthly premiums.
Itâs important to remember that every company has different policies, so itâs vital to shop around for the best terms. Compare underwriting guidelines, age limitations and premiums for each level of coverage the company offers.
Donât be afraid to ask a local broker for help comparing the different types of life insurance available to you before making a final decision.
~Hereâs to Your Financial Health
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