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Top factors that impact your life insurance premium

When shopping for life insurance, it’s safe to say we’re all seeking the best value. We want to get the most coverage for the lowest price.

While comparing life insurance quotes across insurers is one of the best ways to secure affordable pricing, there are many other factors at play. Some of these factors are in your control, and others aren’t.

When shopping for life insurance, it’s safe to say we’re all seeking the best value. We want to get the most coverage for the lowest price.

While comparing life insurance quotes across insurers is one of the best ways to secure affordable pricing, there are many other factors at play. Some of these factors are in your control, and others aren’t.

If you’re in the market for medically underwritten term life insurance (usually the best bang for your buck), the premium pricing is personalized to you. This means an underwriting platform (or person) is looking at you and only you to offer you the most affordable rate available based on your lifestyle and health history.

With the help of some actuary all-stars on our team here at Haven Life, we’ve identified key areas besides coverage amount and term length that impact term life insurance pricing throughout the industry.

Your age

Age is one of the most substantial underwriting considerations. It not only dictates the price of your policy but also impacts how much coverage you can purchase.

Younger people get the best insurance rates because they present a lower risk to insurers. You can’t control your age, of course, but you can control when you buy a policy. (Assuming you’re only purchasing life insurance when you need it.)

For example, a 35-year-old man in excellent health can buy a 20-year, $500,000 policy starting at $21 a month. If that same applicant waited until he turned 40, coverage would start at $30 a month. That extra $9 a month may not seem substantial, but over 20 years, it would add $2,160 to the cost of coverage.

Proactivity is key. As time passes, the more likely you are to develop a disease or condition that would make it harder for you to get coverage at a good rate. Ensure your insurability by making moves sooner rather than later.

Gender

In almost all states, premium rates are higher for men than for women. (Fun fact: Montana is the only state to require unisex rates.) The rationale for why is actually simple. Statistically, men have a shorter life expectancy than women. And since insurers base pricing on mortality risk, it means pricing is adjusted for male applicants.

While underwriting by age and gender can be a hot-button issue for some, it’s also important to know what kind of factors life insurance companies cannot legally include in their underwriting decision. For example, how race and ethnicity affect life expectancy cannot be considered.

Tobacco use

It’s no secret, but tobacco is terrible for your health. And it’s not only about lung cancer. According to the Centers for Disease Control, tobacco harms just about every organ in your body and can lead to premature death. Because of this, insurance companies face a much higher risk with tobacco users.

There’s no way around it. Insurance companies face a much greater risk with tobacco users. But, how does this risk translate into premiums? A 37-year-old woman in excellent health who does not smoke could purchase a 30-year, $500,000 policy for about $36 a month. If she were a smoker, she would pay around $128 a month. Over 30 years, that policy would cost a tobacco user $33,120 more.

If you are a tobacco user and you’re thinking about quitting and applying for term life insurance, it’s important to know that most insurance companies require that you be tobacco-free a certain amount of time before they will offer you a non-smoking rate. For example, Haven Life requires you to be tobacco-free for a year.

Personal health history

Not surprisingly, to purchase a medically underwritten term life insurance policy, you’re going to be asked about your physical and mental health history.

The healthier you are, the cheaper your policy. So, if you were looking for a little push to lose some weight and improve your cholesterol, you can always use “affordable life insurance rates” for added motivation.

Another factor in your personal health history will be any persistent medical conditions. You shouldn’t fear a health questionnaire and medical exam if you have a chronic condition. Medically underwritten coverage can still be a better value than a simplified issue or group policy, which doesn’t look at your full medical history but charge you more for the unknown risk insurers are taking on.

Because all applicants are evaluated on a case-by-case basis, eligibility and pricing will depend on the type of illness or condition, when it occurred, treatment plan, and if there was a recent surgery or hospitalization — just to name a few factors.

Prescription history

Along with your medical history, underwriting will also take into account your prescriptions, both past, and current. By looking at your prescription history, underwriters can see that it matches what you’ve already told them and be confident that you are an honest applicant. If you omit something from your Rx history, an underwriter might logically assume that you may have made other omissions. This could lead to an additional investigation and lengthen the time it takes to get your policy.

Being open and honest in the application allows the underwriter to feel comfortable that no critical data is missing or inaccurate. This, in turn, allows them to give you the best rate possible for your situation.

So, like your parents, grandparents and teachers always said, honestly really is the best policy.

Family health history

To get a complete picture of your health, insurers must also examine your immediate family’s health. Insurers will ask about your family’s history of illnesses like diabetes, heart disease, and cancer to have an understanding of your subsequent risk over time.

Many diseases have a hereditary component. In some cases, having a family history of illness increases the chance that an individual will develop a condition later in life. Underwriters consider the severity, age of onset and whether it caused a loved one’s death in making their final decision.

It’s also worth noting that some life insurance companies have begun using genetic testing information. Exposing more data to an underwriter could have both a positive or adverse effect on your premium, but it would give the applicant the chance to demonstrate that they do not carry the same genetic marker as a family member that had a particular disease. In that case, having a family history of something like cancer may not impact your underwriting class at all.

Driving or criminal records

Accidental death is something that underwriters have to consider when making their final decision. One way they can determine your risk is by looking at your driving records. For example, if your driving record includes multiple, at-fault collisions over the past few years or significant speeding infractions, it may cause a rate increase. If it’s been more than three years since your last accident, your driving record is less likely to have an impact on your premium amount.

Additionally, a criminal record may impact your eligibility for several reasons. It can indicate a tendency toward riskier behavior (do you see a trend here?) and incarceration can cause poor health and premature death.

Credit attributes

While your credit score is not something the life insurance industry would consider in underwriting, your credit attributes might be.

Credit attributes indicate your track record for making sound financial decisions and speak generally to your risky or responsible behavior. You might be interested to know that many industry studies show a strong correlation between certain credit factors and mortality.

An example of a credit attribute that life insurance companies would look at is whether or not you have filed bankruptcy. While for many people, bankruptcy can be a result of unfortunate events that occurred beyond their control, for some it can indicate poor decision-making or even be a red flag for medical problems because many bankruptcies are the result of medical bills. Additionally, the life insurance industry carefully monitors fraudulent policy activity, so a poor financial history could be an indication that an applicant intends to purchase a policy for illegal purposes.

The impact of credit data is still evolving in the insurance industry. While some underwriters will use it as a triage method to decide whether or not to order additional info from an application, many agencies (including Haven Life) do not directly use credit data to make an underwriting decision.

How you work and play

Your job is considered in the underwriting process because, let’s face it, some people have risky occupations. For example, active military personnel, police officers, firefighters, and even helicopter pilots (but not major airline pilots) and construction workers all have careers that put their lives at a greater risk than those with desk jobs. In most cases, this would not prevent you from being able to secure coverage, but it can increase your premium rates.

(Full disclosure: active military is not currently eligible for our Haven Term policy.)

Additionally, life insurers will also seek to find out if you are an adrenaline junkie. If your hobbies include mountain climbing or skydiving, you present a greater risk to insurers, and your eligibility and premiums will be affected. Though it’s still possible to get coverage, how often you participate in risky activities will make a difference. Skydiving once is less dangerous than skydiving on a weekly basis, and insurance underwriters recognize frequency.

The benefits of being honest and open

Providing personal information feels, well, personal, but the term life insurance underwriting process is essential to assessing risk and offering you as affordable a premium as possible. In group policies, where you answer fewer (or no) questions, that uncertainty is priced into your premium.

Since there are many companies out there selling cheaper policies to people who share information, insurers assume that those who opt not to are riskier and therefore charge them more. As a result, if you are indeed a healthy individual, you will often have to pay a significant premium if you don’t buy a personalized medically underwritten policy.

As with all things in your application, it’s imperative that you are truthful and honest. If a claim were ever made on your policy, the insurance company would do some routine investigating before paying the death benefit. So, if it turned out that you were deceitful, your beneficiaries (maybe your partner or children) might not get the payout.

Getting life insurance coverage provides you with peace of mind that your loved ones are financially protected. But just because this is such an important product, doesn’t mean it needs to be complicated to buy. By having a good grasp on industry underwriting practices and key factors that contribute to determining premiums, you’ll be more confident about your purchase and selecting a policy that’s right for your loved ones.

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Adam Weinberg

About Adam Weinberg

Adam Weinberg is the Brand Director for Haven Life, where he’s working hard to make life insurance easy. Adam is a creative problem solver who uses unique brand moments to create meaningful customer experiences.  Adam has more than a decade of diverse editorial, marketing, and branding experience, including work on several award-winning campaigns for various digital media companies.

Read more by Adam Weinberg

Our editorial policy

Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our editorial policy

Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.

Haven Life is not authorized to give tax, legal or investment advice. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Individuals are encouraged to seed advice from their own tax or legal counsel.

Our disclosures

Haven Term is a Term Life Insurance Policy (DTC and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Haven Term Simplified is a Simplified Issue Term Life Insurance Policy (ICC19PCM-SI 0819 in certain states, including NC) issued by the C.M. Life Insurance Company, Enfield, CT 06082. Policy and rider form numbers and features may vary by state and may not be available in all states. Our Agency license number in California is OK71922 and in Arkansas 100139527.

MassMutual is rated by A.M. Best Company as A++ (Superior; Top category of 15). The rating is as of Aril 1, 2020 and is subject to change. MassMutual has received different ratings from other rating agencies.

Haven Life Plus (Plus) is the marketing name for the Plus rider, which is included as part of the Haven Term policy and offers access to additional services and benefits at no cost or at a discount. The rider is not available in every state and is subject to change at any time. Neither Haven Life nor MassMutual are responsible for the provision of the benefits and services made accessible under the Plus Rider, which are provided by third party vendors (partners). For more information about Haven Life Plus, please visit: https://havenlife.com/plus.html

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