Many people consider and purchase life insurance to protect and provide for their loved ones in the event of their death. There are different types of insurance that can provide for mortgage protection, income replacement, final expenses and college funding. However, the coverage or payout would depend on the type of insurance that you choose, such as the following 3 types:
Whole-life policy – A type of permanent insurance which combines an investment fund with life coverage. This life insurance will pay a pre-determined, fixed amount upon your death. Part of the premium paid goes into the investment fund as well.
Cash-value life insurance – A type of cash-value insurance, including universal life and variable life. In a cash-value life insurance policy, it accumulates value while the policyholder is still living. The policyholder can use the cash value as a fund to borrow for future premium payments or they can use it as a tax-sheltered investment.
Term life insurance – With term life insurance, the policy is only active as long as the policyholder is still paying the premiums. The terms are renewable annually and purchased year-by-year; you also don’t have to requalify for signs of good health every year either.
After deciding on which type of life insurance you are interested in, it is important to know what factors play a role in determining your qualifications and premium rates.
1. Your age is a strong factor in determining your rate. The younger you are, the lower the premium will be. The assumption is that you have a long life ahead of you and many more years before passing away.
2. Your health history is also an important determinant in your rate. If the insurance company decides that your health history is risky because you have a history of chronic disease or other potentially fatal health problems, you will have higher rates.
3. Your current health also plays a role.. You could have had problems before, but your recent or current health status can also give them an indication of any future health problems. If you are in good health, your rates will be lower.
4. Your weight, interestingly, is surveyed as well. Considering obesity can lead to a shorter life, your premium may go higher. This would be for both term life insurance and permanent life insurance.
5. Your occupation is also a risk to the insurance company if you are in a considerably dangerous profession, such as race car driver or coal miner. Some occupations may be so risky that the insurance company may even deny coverage because of the high potential for accidental death.
6. Smoking is understandably a factor. Smokers will pay more for life insurance because of the health risk and shortened life expectancy.
7. Drinking alcohol also creates a negative effect on your health. The heavier you drink, the riskier the insurance company views you.
8. Your family history also determines what illnesses may come with your genes. With more serious illnesses in your family, the higher your premium will be.
9. Your gender also says something about your life expectancy. Women tend to live longer than men, as a general finding.
10. The policy itself, of course, determines how much you will pay. The larger the amount of death benefit, the higher the premium.
All of these factors play an important role on the insurance company accepting you for their policy; however, the weight of each factor depends on how the company itself rates them. Term life insurance has a slightly different way of determining your premium though. With term life insurance, you’ll choose the length you want coverage for and the longer the period is, the more expensive the payments will be. Talk to a life insurance agent to find out which policy fits best for your lifestyle.
Do you have life insurance? Feel free to share your thoughts in the comments section below.