So, you have applied for life insurance, filled in a lot of details about yourself, some of it personal, some of it not, and the life insurance firm responds with a premium you are required to pay. So what determines what this premium will be? In fact there is no mystery to the process of calculating premiums, rather sound logic based on how much risk is involved in taking you on as a customer. Unsurprisingly, life insurance firms will want to minimise the risk that they will lose money by accepting your application. Let us look at the process of calculating premiums in a little more detail.

Perhaps the key to understanding life insurance premiums is to weigh up how many ‘risk factors’ your application displays. Some of these are related to one’s lifestyle. If you smoke, and nicotine is found in your urine test; or if you drink and elevated liver enzymes are found in your blood sample, insurers will have good reason to expect that your lifestyle is not conducive to good health. On this basis, the simple truth is that you will be expected to die sooner than someone with a healthier lifestyle. Similarly, life insurers will charge more to those who are substantially overweight. How overweight you are is measured by taking your weight, and factoring in your height to determine your ‘build’, and will increase your premiums in increments. Being mildly overweight will not raise your premium by much, but it will increase substantially if you get moderately overweight or worse.

Of course the reason for such lifestyle choices raising your premiums is because they increase the risk you will suffer from specific diseases. Heart disease, high blood pressure, diabetes, asthma, high cholesterol, liver damage, and stroke: all these are possible consequences, and possible killers, that could be motivated by poor health choices. If you have these diseases already, as chronic health conditions, then you can also expect an increase in your rates. They may be lowered by paying attention to control of your condition. Asthmatics that take their prescribed preventative medication, or diabetics whose condition is controlled sufficiently to exhibit healthy insulin levels, will pay lower premiums than those who life insurers consider to be taking inadequate control of their health problems.

Your premiums are to some extent calculated on factors that you will not be able to change. Your gender will affect rates because women tend to live longer, resulting in lower rates but higher annuities than men. Your age will be factored in because it will influence the length of time you will be paying premiums for, not to mention how healthy you are along with the potential for you to become ill.

When you apply for life insurance you will be assessed by a doctor after you have completed an extensive medical questionnaire. Do not try and lie or beat the system by denying that you have certain lifestyle choices or medical conditions. Not only are you unlikely to get this past the screening process, but if you do, and the life insurer later discovers that you were lying, they may cancel the policy and even deny payment to your loved ones when you die. Trying to save money on your premiums in an underhand way may have severe consequences: do not risk this.