How Do Insurance Companies Calculate Life Insurance Rates?

Answer:
Life insurance companies use a variety of factors when determining the rates they charge.

One of which is the likelihood of you dying. With this in mind, your age and overall health are heavily considered as well as the types of behaviors you engage in. For example, who do you think will pay more in annual life insurance premiums: a healthy woman in her early thirties or a lifelong smoker in his sixties?

When buying life insurance, you are often asked to take a physical so that the insurance company can determine whether you are a good risk. The worse your health is, the higher your rates will be. If the physical shows that you have terminal cancer, you will pay more in life insurance (unless you are denied) than if you had a clean bill of health. This is simple risk management. If the insurance company thinks you are at risk of dying sooner rather than later, they will set higher rates.

In addition, women have longer life spans than men so their rates tend to be lower.


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