High Premiums: A Life Event For Insurance?

Life insurance premiums are influenced by a variety of factors, including age, gender, health, lifestyle choices, and driving record. While these factors can impact the cost of premiums, it is unclear if high premiums themselves can be considered a life event for insurance. A life event, in the context of insurance, typically refers to a significant change in one's life or income, such as those mentioned in the sources: marriage, divorce, the birth or adoption of a child, or a change in employment. Therefore, it seems that high premiums alone would not qualify as a life event, but rather, the factors contributing to high premiums may be considered life events.

High-risk hobbies and behaviours

The frequency of participation in these high-risk activities also plays a role in determining the impact on insurance premiums. For example, occasional adventures or infrequent participation may only result in a modest increase in premiums, while regular and frequent involvement can lead to substantial increases. Insurance companies will consider various factors when assessing the risk associated with these hobbies, including the type of activity, frequency, location, level of difficulty, certifications, safety precautions, and more.

It is important to note that not disclosing high-risk hobbies on your life insurance application can have serious consequences. If you pass away due to an activity that was not disclosed, the insurance company may refuse to pay the death benefit, considering it insurance fraud or a material misstatement on the application. Therefore, it is crucial to be honest and provide accurate information when applying for life insurance.

Additionally, other factors beyond high-risk hobbies can also influence life insurance premiums. These include age, gender, health status, family medical history, driving record, and lifestyle choices such as smoking or dangerous occupations.

To mitigate the impact of high-risk hobbies on life insurance premiums, individuals can consider working with a life insurance broker who can help find companies with the most favourable view of their specific hobby. Being proactive with health management, limiting risky behaviours, and comparing quotes from multiple insurance providers can also help find more affordable coverage options.

Pre-existing medical conditions

In the United States, health insurance companies are prohibited from refusing coverage or charging higher premiums based solely on an individual having a pre-existing condition. This protection is provided by the Affordable Care Act and applies to all Marketplace health plans, as well as Medicaid and the Children's Health Insurance Program (CHIP). However, "grandfathered" health plans, or those purchased before March 23, 2010, are not required to cover pre-existing conditions.

When it comes to life insurance, pre-existing conditions can still affect the cost of coverage. Insurers will typically request access to medical records and may perform a medical exam to assess an applicant's health. This allows them to determine the risk associated with providing coverage and set premiums accordingly.

Some common pre-existing conditions that can impact life insurance premiums include:

• Diabetes
• High blood pressure
• High cholesterol
• Cancer
• Heart disease

Additionally, family medical history can also play a role in determining premiums. If there is a history of major diseases in an individual's immediate family, insurers may consider them to be at higher risk of developing those conditions themselves.

It is important to note that lifestyle choices, such as smoking or engaging in risky hobbies, can also influence life insurance premiums. These factors are often taken into account alongside any pre-existing conditions when determining the cost of coverage.

Age and gender

Age is one of the most important factors in determining the premium cost of a life insurance policy. The younger you are, the lower your payments. The premium amount increases on average by about 8% to 10% for every year of age. This is because the cost of life insurance is based on actuarial life tables that assign a likelihood of dying while the policy is in force. The older you are, the more likely you are to become ill or die while under coverage.

In addition to age, gender is also a key factor in determining the cost of life insurance. Women generally pay lower premiums than men because they tend to live longer. According to data, the projected average life expectancy for a female in 2022 was 80.2 years, compared to 74.8 years for men. As a result, insurance companies may pay out a life insurance benefit earlier for men than for women, leading to higher premiums for men.

Lifestyle choices

Smoking and Drinking

Smoking is a well-known risk factor for various health issues, including cancer, cardiovascular disease, and lung disorders. Due to the increased health risks associated with smoking, life insurance premiums are typically higher for smokers. In some cases, smokers may even pay more than double the rate of non-smokers. Similarly, excessive alcohol consumption is linked to an increased risk of liver, kidney, digestive, and brain disorders. As a result, insurers may view heavy drinkers as higher-risk individuals and charge higher premiums.

Occupation

An individual's occupation can also influence their insurance premiums. Those engaged in professions that expose them to hazardous chemicals, heavy machinery, or an increased risk of injury may be subject to higher premiums. This is because their jobs may increase the likelihood of health issues or premature death. Similarly, individuals with sedentary jobs may be viewed as higher risk due to the potential impact on their overall health and well-being.

Risky Activities and Hobbies

Participation in risky activities and extreme hobbies, such as racing cars, rock climbing, or scuba diving, can also result in higher insurance premiums. Insurers consider these activities to increase the risk of injury or death and, therefore, may charge more for coverage.

Driving Record

An individual's driving record can also impact their insurance premiums. Frequent speeding tickets, driving under the influence (DUI) violations, or license suspensions indicate a higher risk profile. As a result, insurers may increase premiums or even deny coverage to individuals with multiple infractions.

Weight and Overall Health

Maintaining a healthy weight and managing health conditions can also influence insurance premiums. Individuals who are overweight or obese may be viewed as higher risk due to potential health complications. Similarly, pre-existing medical conditions, such as high blood pressure or diabetes, can result in higher premiums as they are likely to require additional tests, medication, and treatment. On the other hand, making positive lifestyle changes, such as improving one's diet and engaging in regular exercise, can have a positive impact on health and potentially lower insurance premiums.

Policy type

Term life insurance is ideal for individuals who only require coverage for a set number of years. For example, a parent might opt for term life insurance that lasts until their child reaches the age of 18 and becomes financially independent. Term life insurance policies usually offer fixed premiums that remain unchanged throughout the term. However, the premium amount depends on factors such as age, health, and lifestyle choices. Younger and healthier individuals often secure lower premiums due to their lower risk profile.

Permanent life insurance, on the other hand, provides coverage for the duration of an individual's lifetime, assuming premiums are paid regularly. This type of policy is more expensive since an eventual payout is highly likely. Permanent life insurance policies also include a cash value component, which grows over time and can be accessed by the policyholder.

Whole life insurance, a type of permanent life insurance, offers a set premium that remains unchanged. It provides lifetime coverage and allows the accumulation of cash value over time. Universal life insurance, another variation of permanent life insurance, offers flexible premiums and adjustable coverage. Policyholders can choose to pay higher premiums to boost the policy's cash value or pay a reduced premium if there is sufficient cash value.

Variable universal life insurance combines the flexibility of universal life insurance with the investment flexibility of variable life insurance. Policyholders can choose the premium amount, face amount, and invest the cash value in a separate account. However, it's important to note that there are no guarantees of investment earnings or cash values with this option.

Frequently asked questions