9 Factors that can affect your life insurance premiums

9 Factors that can affect your life insurance premiums

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Life insurance has many perks.

It provides a tax-free lump-sum death benefit, which can provide income for a spouse, dependent children, or any loved ones that you might leave behind. Said benefit can serve many purposes: pay off a mortgage and other debts (such as car loans, credit cards, and student loans), guarantee that your children will be able to go to college, or simply maintain your family's lifestyle.

As we can all agree, it is a great financial tool to have, especially considering how life can be unpredictable. But of course - it comes with a price.

This price (known as premium) differs among insurers due to many factors. From age and occupation to the type of policy and coverage amount you are interested in obtaining, an exhaustive list of factors will determine your life insurance premiums.

But here's what you have to understand: the policy premium is based on the applicant's odds of dying prematurely. So the healthier, safer, and younger you are, the lower your premiums will be across all sorts of insurance plans.

Does that mean life insurance is hard to obtain?

Although we would like to say no, the truth is that it depends. Many factors can determine whether it will be easy for you to get a life insurance policy or not. These factors vary depending, most of all, on the insurance company.

Each insurance company has its formula for calculating how risky someone is to insure. Companies may categorize the risk differently for the same profile, according to which they decide the lower or higher premium for their life insurance plan. Yet there is one thing you can count on: the younger and healthier you are, the cheaper your policy will be.

So if you are a healthy person between the ages of 20 and 40, now could be the best time to apply for a life insurance policy. But keep this mind: given that every company has a different way of calculating your eligibility and rates, you should shop around as much as possible before deciding.

Factors that can affect your life insurance premiums

The cost of a life insurance policy is determined by several factors – such as your personal history and health and the type of insurance policy you want. Bellow, we will analyze each of the most common factors that can affect your rates:

1. Age

This is one of the most significant determinants of your rates. To put it simply, the younger you are, the cheaper your life insurance will be. The cost of life insurance premiums rises as you age because statistically, you are more likely to die or develop health problems the older you get. It might sound strange, but the best time to apply for life insurance is when you are young, healthy, and not likely to need it.

When you are young and healthy, your premiums are locked in at a lower rate, resulting in potential premium savings over time. So even if you don’t have dependents or outstanding debts right now, getting a life insurance policy can still be a smart financial move to make. According to PolicyGenius, the cost of purchasing life insurance increases on average by 4.5-9% each year that you age - so you better make that move as fast as possible!

2. Gender

Gender matters because women, on average, live longer than men. According to Statistics Canada, life expectancy is at 83.9 years for females and 79.8 years for males. Because they will likely be paying their insurance premiums for a more extended period, women can expect lower quotes in general - health and other factors aside.

3. Health Status

Since your health status impacts your life expectancy, insurers try to predict your lifespan based on your current health conditions. To that end, most companies will likely ask you to undergo a few medical exams to assess how healthy you are. These are the conditions that insurance companies usually require information on:

  • HIV/AIDS and hepatitis.
  • Cholesterol levels.
  • Hyperglycemia, or elevated glucose (which is an indicator of diabetes).
  • High blood pressure.
  • Use of recreational drugs.
  • Use of nicotine products.

If you want to buy life insurance fast and without disclosing your health status, you can opt for a No Medical plan. In these plans, you won't be required to undergo medical exams and schedule a doctor’s appointment, which is particularly helpful for those with pre-existing conditions that could make them ineligible for insurance. A significant drawback to this type of life insurance is the cost. But while the life insurance premiums might be higher, you will still be able to ensure your family's protection - and that's the main goal, isn't it?

4. Family Medical History

For most insurance companies, it is not just your current health status that matters; it is also essential for them to understand your family’s medical history. You and your family members share genes, which means that if there is a history of cancer, heart diseases or diabetes, for instance, you have a certain probability of also developing these conditions.

If a close member of your family has had any severe conditions, the insurer will likely bump up your premiums. But once again - it depends on the insurance company. And it also depends on the severity and frequency of the disease in your family’s health history.

5. Smoking Status

Smoking is terrible for your health and increases your likelihood of developing a long list of diseases. Chemicals in tobacco smoke increase your chances of developing heart problems, cardiovascular diseases, lung diseases, diabetes, and chronic obstructive pulmonary disease. Considering all these risks, it is easy to understand why your smoking status can dramatically influence your life insurance premiums.

If you are a smoker, the smartest move you can make is to quit smoking. This decision will not only improve your general health status but also help you enjoy better rates. But don’t forget: only when you have been smoke-free for 12 consecutive months you will be considered a non-smoker. If you need more information on smoking cessation, visit Health Canada’s website for some helpful services, articles, and statistics.

(Little side note: vapers won’t help you either, because nearly every insurer considers e-cigarettes in the same category as regular cigarettes.)

6. Lifestyle

Although it may look like it, the requirements aren't just based on your health. Your lifestyle is also a key piece in the process, as it can guarantee you lower (or higher) rates. Assessing how healthy you are and how risky you are to insure also has a lot to do with your lifestyle.

For example, if you demonstrate that you have a healthy lifestyle and exercise frequently, the insurance company will look at your case more favourably. However, your hobbies can have the opposite outcome.

Specific activities that increase your chances of death (like skydiving, bungee jumping or scuba diving) can cause you to pay more for life insurance or even make you uninsurable. Does that mean you should lie or hide your hobbies when asked about them? Absolutely not. Purposely lying on your life insurance application is a fraud, and the insurance company can immediately decline your coverage or block your beneficiaries from receiving the death benefit.

7. Job Occupation

Since risk levels determine your life insurance rates, insurers will also use your occupation as a decisive factor. To obtain the best classification rates, your job cannot include any hazardous duties. Each life insurance company has its definition of “hazardous,” but commonly, it refers to anything associated with an increased risk of injury or death. These are some of the high-risk jobs that generally affect life insurance premiums in Canada:

  • Firefighters and police officers.
  • Construction Workers.
  • Loggers.
  • Pilots and flight engineers.
  • Fishers and farmers.
  • Active military members.
  • Underground miners.
  • On-site oil and natural gas workers.

If you work in any of these fields and want to increase your chances of getting coverage, you should consult insurers specializing in high-risk applicants, such as seniors and those with dangerous professions.

8. The type of insurance plan

As you know, there are many types of life insurance policies that offer different coverage amounts, payout structures and investment options. Depending on the product you are interested in, your application process and rates can significantly vary.

If you are interested in a term life policy (which, as the term implies, protects you for a specific period), you will likely find that the premiums are lower in comparison to permanent policies. That happens because these plans offer straightforward benefits and flexibility.

The premium payments for a permanent insurance policy are considerably more expensive for the same death benefit because it comes with a guaranteed death benefit and several investment options. In fact, according to Policy Genius, the premiums for a whole life insurance policy can cost up to 10 times as much as a term life policy for the same death benefit amount.

Bottom line: before jumping into a lengthy application process, be sure of the type of product (and coverage) you and your loved ones need. This is the first step towards finding the best offers and rates.

9. The Coverage Amount

Another critical factor in determining life insurance premiums is the amount of the death benefit. As you can imagine, premiums will be lower for a $100,000 life insurance policy than a $1 million policy.

Considering that your coverage amount (or death benefit) is the amount of money your beneficiaries will receive tax-free if you die, it is essential that you determine this amount wisely. You might want lower premiums, but your priority has to be your family’s necessities. Consider its present and future needs (along with potential existing debts) and determine the minimum amount of coverage to ensure their wellbeing.

Here is how the process works at TermLite

TermLite is all about making insurance easy, fast and affordable for every Canadian. That is why our application process is quite straightforward.

As long as you are a Canadian resident between the ages of 18 to 70 you are eligible to apply. You simply need to fill out our quick application form and wait for our advisors to call you to verify the information. If you are satisfied with the quote and the protection the plan offers, you can complete your application right over the phone with the advisor.

And that is it!

Our term life insurance coverage takes the simplicity of traditional term plans one step further. As we don’t require medical exams, lengthy questionnaires, or endless paperwork, the whole process is way faster than usual - which means that you can get your coverage in as little as 24 hours.
If you have any questions about our coverage or process, please call us or send us a message on our Contact Us page. We will be happy to help you!


Written by Raquel Dias

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