A life insurance plan plays a crucial role in a person’s life because it protects your family and allows you to leave behind a non-taxable amount at the time of death. Besides this, life insurance aids in maintaining the quality of your life when you’re retired and no longer insured by your employer.
Statistics indicate that the United States is the largest insurance market in the world, with China and Japan being the second and third largest markets, respectively.
According to research, around 57 percent of American citizens had life insurance in 2019. Similarly, another study revealed that investments in the Insurtech industry have been increasing every year since 2013.
One reason that the majority of people opt to buy life insurance is that adequate insurance coverage reduces your worries during your difficult times, thus ensuring peace of mind.
However, before you think of opting for a new life insurance plan, you need to understand how the premiums change over time.
Factors that Impact Life Insurance Premiums
There are two types of insurance plans:
- Life coverage plan
- Term life insurance.
A life coverage plan offers you an insurance cover for life, and term life insurance lasts for a specific period. The annual premium that you pay on both will depend on several factors.
Not sure which factors can help determine your life insurance premiums? Here are the top 7 factors that play a critical role in determining what you will pay in premium:
1. Your Age
Age is a critical factor in determining your insurance premiums. If you opt for a life insurance plan at an early age, you will have to pay low insurance premiums as compared to the premiums you pay if you buy insurance at a later stage in your life.
2. Your Gender
Statistics reveal that men tend to pay more for life insurance compared to women. Do you know why? It is because, according to a study conducted by WHO, women generally live longer than males – on average, by six to eight years.
3. Your Health
Life insurance works as a protection in case of an unforeseen accident. One of the biggest factors in the insurance plan is your health. Therefore, the better your health is, the lower your premium would be.
4. Your Smoking Habits
Insurance companies take tobacco usage and smoking habits very seriously because these habits are bad for your health. So, if you’re a smoker, they would charge a higher premium compared to that of non-smokers.
5. Your Family Health History
Your health not only depends on your lifestyle choices but on your genetics and family health history as well. Therefore, while you’re opting for a life insurance plan, the detailed health history of your immediate family is taken into account.
For example, if you’re a woman and your mother and sister were previously diagnosed with breast cancer, then your premium might be higher due to increased risk.
6. Your Occupation
Similarly, if you’re involved in an occupation that has higher chances of risking your life, then you will have to pay more for your life insurance compared to someone who is in a profession that entails less risk.
For instance, deep-sea fishing is considered one of the most dangerous jobs in America, thus raising the life insurance rates for people involved in this profession.
7. Your Driving Record
It might be surprising, but many insurance companies consider your driving history during the underwriting process. So, if you have good driving practices, then you might be able to negotiate lower premiums for your life insurance plan.
Will Life Insurance Premium Rise Over Time?
People opting for life coverage plans often wonder whether their insurance premium will rise, remain steady, or reduce over time.
It is a known fact that the annual premium or rate for a life insurance policy is calculated at the time of purchase according to the duration of the policy.
So, in the case of life insurance, the premium does not increase over time. On the contrary, it remains steady over time so that you can leverage its benefits fully.
However, in the case of a term life insurance policy, the premium amount increases with the increasing age. It is because, on every birthday, you are one year closer to your life expectancy, thus being more expensive for the insurance provider.
Still not sure how the annual premiums of a life coverage plan are determined? The best way out is by consulting an expert insurance provider.
In a nutshell, the lack of a life coverage plan can affect the quality of your life and your future financial well-being.
All in all, every year of your life can tack dollars on your life insurance premium. Therefore, you should try buying an effective life coverage plan before your next birthday.
One of the best practices for ensuring that you receive the best rates for the coverage is to obtain quotes from two or three life insurance companies.