If you have had lung issues, asthma or any other problems that could reduce your life expectancy, this will increase your premium as it increases the probability the insurer is going to have to pay out.
The world of insurance can be difficult to navigate as there is so much terminology to understand. Often, you will hear talk of paying a ‘premium’ for insurance. But what is an insurance premium and why might the price of a premium be liable to change?
A life insurance contract will often state that if the policyholder pays a certain amount of money a month, the insurer will pay a large amount of money to a dependent of the policy holder if they are to die.
The monthly payments made by the policyholder are called premiums. These will be agreed in the contract and cannot be changed during the term of insurance. Failing to pay the premium however could result in termination of the policy without any refunds. It is essential that you know the pros and cons of return of premium insurance and this article should help you understand in further depth.
What Variables Affect Premium Insurance?
Previous Illness / Health Issues
If you have had lung issues, asthma or any other problems that could reduce your life expectancy, this will increase your premium as it increases the probability the insurer is going to have to pay out. Regardless, if your issues are still a threat the insurer will still see it as a potential hazard.
Life threatening hobbies such as smoking or dangerous sport
As we all know smoking is one of the biggest factors to a shortened life expectancy. Of course, if you are known to smoke or have done in the past 12 months, the insurance company will suspect the probability of you dying is higher due to lung issues, cancer or other health issues that are accompanied with smoking. As far as dangerous sports go, if you are risking your life even on a professional level, you are increasing your probability of death in the eyes of the insurer.
As you grow your body will deteriorate or you could be more vulnerable to deadly illnesses so insurers increase your premium.
Previous drug misuse
Drug use can have effects on your future mental and physical health. Especially if dietary or other health requirements have been compromised in the participation of such activities.
How Can Certain Coverage Types Affect Your Policy?
Certain coverage such as increasing term insurance takes into consideration the rising rate of inflation by comparing to the Retail prices index (RPI) this means that the payout will increase each year depending on how the economy behaves. As this is unpredictable, the insurance company will charge a higher premium for such service.
How much return you expect if you are to pass away?
If you request a larger sum of money, the insurance company is going to ask for a higher premium to compensate. Honesty is key with your insurer as well, if you have previously had health issues or smoke, the insurer must know. It will increase your premium but if you are to die the insurer will investigate all the information and if they find a discrepancy the policy will be invalidated and they won’t pay out.