21 May How Do Life Insurance Premiums Work?
Life insurance premiums are what you must pay the insurance company for your life insurance cover. What you are charged often depends on certain factors such as your age and your risk of death factor. In offering insurance, insurance companies always work to get the most income for the least payout. So anyone who is young and healthy is deemed to have a good chance of paying insurance premiums for many years before the company will need to pay out insurance for them. This is why that class of people are offered lower premiums.
However, an older person is quite likely to develop a terminal illness or simply die through natural causes more quickly, so their premiums will be higher to cover that eventuality. Some people are considered to have a higher death risk even if they are in a younger age group. These are normally people who smoke and drink on a daily basis.
They too will be charged a higher premium to cover the eventuality of an earlier than normal death. Added to the higher risk group are those people whose jobs are considered to be dangerous or in a higher risk category. For instance, builders are much more likely to be fatally injured in the job than someone who spends their day behind a desk.
Also in the high risk category is a person who regularly indulges in a high-risk sport such as mountain climbing, hang-gliding and bungee jumping. Life insurance premiums for such individuals will always be higher than for others. When you apply for life insurance you will be asked to answer questions pertaining to your work, health and hobbies.
If you do not answer truthfully and happen to die from an accident related to such high risk activities, or from a health related illness, then your insurance company may refuse to pay your beneficiaries anything.