What’s Driving Up Your Life Insurance Rates? You Might Be Surprised
The offers are so enticing: You can purchase a life insurance policy for less than the cost of your monthly coffee habit, and give your family peace of mind that they will have some money should you die unexpectedly. Except when you try to actually purchase the policy, the premium you’re quoted is higher than you expected — much higher.
Most people realize that life insurance rates are determined by risk; that is, the higher the risk that you are going to make a claim and cause the insurer to pay out, the more you will pay for coverage. Within the realm of life insurance, your health is the primary determining factor for risk. People who are overweight, who smoke, have high blood pressure, or live with a chronic disease have a higher-than-average risk of premature death, and therefore present a higher risk that the insurer will have to pay on the policy sooner than expected. Such high-risk individuals will pay more for their policies, if they are even approved at all.
Your overall health and age are the primary determinants of your risk, and subsequently, your life insurance rates. However, when you submit for a quick life insurance quote, keep in mind that a few other factors may influence the final cost of your coverage.
1. Your Hobbies
What do you like to do in your spare time? If you enjoy a good chess match or knitting scarves and hats, there probably won’t be too much of an effect on your life insurance rates. If you spend your weekends hang gliding, deep-sea fishing, or alpine skiing? Well, you can expect to shell out a bit more for your life insurance. Partaking in dangerous activities on a regular basis is a red flag to insurers. Most will request more information about your activities before writing a policy, and if you are deemed too high of a risk, then you’ll pay a higher premium — or the company will decline to cover you.
2. Your Travel Plans
Some insurers include your travel habits under the umbrella of hobbies, but most will ask about your plans to travel. Applicants with a tendency to visit off-the-beaten path destinations or dangerous destinations may find it more difficult to get affordable life insurance coverage. And it’s not always travel to obviously dangerous destinations like Afghanistan that gives insurers pause; regular visits to places on the State Department’s travel advisory list (like certain areas of Mexico) can increase your life insurance rates.
3. Your Credit History
When you hear that your credit history influences every aspect of your life, it’s true: Virtually no aspect of your life, from your home to your job to your insurance is immune to the influence of your credit history. While home and auto coverage is strongly influenced by your debt and payment history, bankruptcy is the greatest concern to life insurance carriers. If you have a bankruptcy on your credit history, it’s very likely that most insurers will decline your application until it has been discharged entirely. Insurers that will cover you will often charge high rates.
4. Your Driving Record
How many times have you received a traffic violation in the last three years — including speeding tickets? Have you been charged with a DUI in the last five years? Insurers see bad drivers — those with more than two moving violations in three years, or one DUI in five years — as a high risk. Not only will your auto insurance premiums skyrocket due to your driving record, but your life insurance costs will as well. Life insurance companies view bad driving as a risky behavior that increases the likelihood of death, and will raise your rates accordingly. So if you needed one more reason to drive safely, consider the effect that speeding ticket will have on your life insurance.
5. Your Co-Workers
This mostly applies to those who are buying insurance through their employer’s group life insurance policy options. Insurers determine group rates by the people in the group; in other words, a workplace comprised of primarily young workers in good health can expect lower rates than one with older workers who have a host of health issues. There isn’t much you can do to limit this effect, but if your employer rates are exceptionally high, you may be better off purchasing a policy on your own.
So while staying in good health is the best way to ensure a reasonable life insurance rate, you can also keep your policy affordable by limiting your risky behaviors. Every insurance carrier uses different criteria, but when you understand the nuances of underwriting, you have a better chance of securing coverage at an affordable rate.