How Your Life Insurance Premium Is Calculated

Many clients have wanted to know how are life insurance premiums calculated.  Insurance companies try to minimize their risk when setting the rates that you will pay for an insurance policy. They try to ensure that the premiums paid are higher or lower based on any health or lifestyle risk that you have in your profile.

Term life insurance is there to make sure your family is protected in the event that you pass away early.  This would leave your family possibly with a large mortgage debt and not enough savings to maintain the family lifestyle.  As we get older we hope that mortgage debt would be paid off and we have a large nest egg that would pass on to the family at this point we would be considered self insured.  Some families still would like to carry some form of coverage at this point to further protect the family financially.

How are life insurance premiums calculated based on risk factors?

Insurers especially scrutinize whether you suffer from any of the risk factors such as smoking tobacco, cholesterol levels, obesity, diabetes, and other conditions that could lead to poor health and a quicker death. If you or your family have a history of cancer the company will weigh the possibility of your cancer returning or a cancer diagnosis based on your family history.  The carriers review statistics like these to determine some of the risks.  The insurance carrier will also look at how well treatment worked and how many years it has been since remission.  In some cases the longer it has been the better rates that can be found.

After they estimate the potential of these risks, insurers will designate your status (using a title such as preferred or standard) based on age, gender and health, and this status determines the amount that you will be required to pay for your life insurance.

To determine your health status, you will have to give your medical history and undergo a physical exam. Make sure to fill accurate details in the health questionnaire. If you furnish them with incorrect information insurance company could cancel your insurance policy. Or if you hide the fact that you are a chain smoker until you’re diagnosed you’re dying of lung cancer, the insurance company is likely to deny the death benefits of your insurance policy.  We don’t want this to ever happen so our agents will go over the life insurance application with you.

However risk factors such as gender or age cannot be controlled. Women generally have a longer life than men, so women have lower rates on life insurance and men pay a lower rate on an annuity. As regards the age factor, younger people will pay insurance premiums for a longer period until they are likely to die but because they are healthier, pay a lower rate than an older person would pay. Your family medical history and lifestyle can play a major role in maintaining or ruining your physical condition.

A medical examiner chosen and paid for by the insurance company will take your physical exam at your home or office. The examiner will check your height,weight, blood pressure and other vital signs. X-ray or EKG may be required for higher policy amounts if you are getting $2,000,000 life insurance quotes and higher.  Blood and urine samples will be taken and tested for any sign of disease, especially for HIV virus, cholesterol level, and for any indications of diabetes, kidney problems, hepatitis and other problems. Samples can also tell of nicotine content, medications and also whether illegal drugs being taken.  We will make these results available to you at no charge for your review.

How The Insurance Companies Set The Rates?

Depending on the condition of your health and calculated risk of the other factors that can be controlled every insurance company decides whether you are a preferred-plus, substandard or any category in between. Then determine the level term life insurance quotes accordingly. Inform your agent if you have any of the risk factors when discussing your life insurance policies as the experienced agent will know what rates are being charged by insurers for specific risks, and is capable of finding an insurance company that doesn’t have increased premiums for a particular condition.

Controllable risk factors that can help lower premiums.

If it’s a controllable risk factor, you should try to prevent and eliminate it. Quit smoking. Lose some weight. Take your blood pressure medication regularly. As your health improves give proof of this to the insurance company to try and lower your rates because an insurance company will never increase the insurance premium, but can definitely decrease it by shopping the policy again when the health issue is solved.

Determine Your Health Class Rating

What sets us apart?…The Spectrum Insurance Group Quote Difference:

A professional insurance representative will consult with you and help you determine a precise rate class.  Our licensed agents will also explain in more detail about how are life insurance premiums calculated.

Your premium payment for a life insurance policy is determined by your health class rating. Rate classifications are as followed, preferred plus,preferred,standard(regular),standard plus (or regular plus), and then a “rated” health class. The rated health has many different tables. To determine which table rating you will be placed in you need to consult with a life insurance agent for an accurate quote.

The Chart below provides detailed requirements to assist you in defining your appropriate health class rating. Typically each requirement must be accurate in order to qualify for the defined health class.

Preferred PlusPreferredRegular
Height & Weight
maximum height/weight
maximum height/weightmaximum height/weight
Tobacco UseNo tobacco use in the past 3-5 years
(varies by company)
No tobacco use in the past 1-3 years
(varies by company)
No tobacco use in the past year
(only for non-smoker)
Blood Pressure140/90 without medication140/90 with medication
150/90 without medication
150/90 with medication
155/95 if age 41-60
160/95 if age 61 or higher
Cholesterol230 without medication
HDL ratio under 5.0
250 with or without medication
HDL ratio under 7.0
300 with or without medication
HDL ratio under 8.0
Driving RecordNo more than 2 moving violations in the past 3 years
No DUI/reckless driving in past 5 years
No more than 2 moving violations in the past 2 years
No DUI/reckless driving in past 5 years
No more than 2 moving violations in the past 1 year
No DUI/reckless driving in past 2 years
Family historyNo parents or siblings diagnosed with heart disease/cancer before age 60No parents or siblings died of heart disease/cancer before age 60Not applicable
CitizenshipUS Resident for past 3 years (or permanent visa/green card)US Resident for past 3 years (or permanent visa/green card)US Resident for past 3 years (or permanent visa/green card)

If you have been treated for any of the ailments on the following chart, you’ll find a dot corresponding to the best rate class for which you’re most likely to qualify. Treatment received for two or more of the problems listed below may classify you for a higher rate class, or it may cause you to be declined for life insurance coverage.  If this is the case we do have guaranteed acceptance plans that you can still qualify for.

Preferred PlusPreferredRegularNon-Regular
Alcohol/Substance abuse
Arthritis (Osteo)
Arthritis (Rheumatoid)
Asthma (steroid meds)
Cancer (basal cell)
Cancer (not basal cell)
Cardiovascular/Heart Disease
Crohn’s Disease
Depression (situational)
Depression (on-going)
Hepatitis A or B
Hepatitis C
Kidney/Liver Disease
Mental Illness
Mitral Valve Prolapse
Multiple Sclerosis
Ulcerative Colitis
Vascular Disease

As you can see there are many factors that go into shopping for the best rates for life insurance. Using an independent licensed agent that will work with you and the underwriter to locate the best rates based on your particular history is extremely important so that you can receive the best pricing on your life insurance policy. View quotes instantly and have one of our experienced agents at Spectrum Insurance Group assist you today.