How does the applicant affect the price of the policy

In setting the premium (price), what do insurance companies take into consideration when you are applying for life insurance? This applies to preferred rates (refer “preferred rates blog” link here) as well as just getting approved at standard rates.

There a number of factors. Some we can control, others we cannot. Some are simple and objective, others complicated and subjective. The most important ones are listed below.

Simple & objective

  • Age: the older you are the more likely you are to die in any given time frame: link to cost and age.
  • Current Tobacco use: smokers die sooner on average. Link on smoking
  • Gender: Women live longer on average than men. Link on gender.

Medical: more complicated & subjective:

  • Body mass index (BMI): being overweight leads to health problems and shorter life expectancy: link to build table
  • Medical history: any medical history that could lead to a premature death is taken into consideration. Diabetes, cancer, high blood pressure links
  • Lab results: if blood, urine, blood pressure etc. is required, this is scrutinized. Cholesterol, blood sugar, blood pressure etc. will be measured.
  • Family history: any history of heart disease, cancer or stroke in your siblings or parents before age 65 will usually preclude you from preferred rates. Link on family history

Lifestyle factors

  • Foreign travel: some places are dangerous to visit: refer article on foreign travel exclusions
  • Past tobacco or part or even current marijuana use: this will usually preclude you from preferred rates – refer article on marijuana use
  • Alcohol/Drug use: moderate alcohol use is OK but any recent illegal drug use other than marijuana will lead to a decline – refer article on drug/alcohol abuse
  • Dangerous hobbies or occupations: deep scuba diving, skydiving, flying small planes etc. will usually lead to an exclusion or decline. Refer lifestyle exclusions

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