Determining Life Insurance Premiums
Life Insurance is the most straightforward of insurance policies when it comes to calculating price. Actuaries have large data sets to determine the optimal price - taking into account your expected life span and requested death benefit.
As you would guess the lower your age the longer you are expected to live. The younger you are when you purchase a policy the less you can expect to pay in premium.
Your Health And Habits
To increase the accuracy of their life expectancy calculations, actuaries also take into account your health and habits to help determine your premium. In addition to current health factors such as chronic diseases, BMI, or high blood pressure, insurance companies also take into account your habits – such as smoking – which negatively impact your life expectancy.
Type of Policy
In addition the type of Insurance Policy you purchase will have a significant impact on your insurance policy. The same individual might pay ten times more for a $500,000 term policy as they would for a $500,000 universal life policy because the latter has both an investment component and an unlimited term.