Life Insurance Rates: Injuries And Their Impact

Life insurance companies assess an individual's risk when deciding whether to insure them and how much to charge. While age, health history, and hobbies are some of the factors that influence life insurance rates, it is unclear whether injuries alone can cause an increase in these rates. Life insurance rates are determined by placing individuals into different risk classes based on factors such as overall health, age, and participation in risky hobbies. Therefore, while injuries may play a role in evaluating an individual's health, it is just one of many factors considered when determining life insurance rates.

Driving record

A driving record is a record with the department of motor vehicles (DMV) that stores your personal identification, license information, and any tickets or other infractions. It can affect your life in numerous ways, from your insurance rates to your right to vote.

When it comes to life insurance, your driving record is important in helping the insurance company assess your risk as an applicant. Dangerous driving behaviour means a greater chance of death, and life insurance companies are aware of this. On average, about 1.35 million people die in traffic accidents each year, and an additional 20 to 50 million people suffer non-fatal injuries, which can lead to long-term disabilities. Therefore, a bad driving record can negatively impact your life insurance application and premiums.

Life insurance companies will consider driving records on a case-by-case basis, assessing infractions based on their severity, recency, and whether they were serial. For example, a new speeding ticket will have a larger, negative impact on your life insurance rate than the same ticket issued 6 years prior. The car accident you had last year, in which you were deemed at fault, will play a larger role in the underwriting process than if it occurred 5 years ago.

In some cases, carriers may even decline your application. Most companies will require that you do not have any DUI, OWI or reckless driving violation for at least 5 years before you can qualify for 'Preferred Best' rates. If you've had one DUI in the last 3 years, you might be able to qualify for a 'Standard' rating. Once you've had multiple DUIs, most companies will flat out decline you for coverage.

If you have a problematic driving history, insurance companies may consider you too much of a risk to insure. They may offer you significantly higher rates, postpone your application, or decline coverage altogether.

However, there are still options for people with bad driving records to obtain life insurance. These include fully underwritten term and permanent life insurance, simplified issue life insurance, and guaranteed issue life insurance.

To improve your life insurance rates, the best thing to do is to drive safely and responsibly.

Criminal record

Life insurance companies consider the risk of extending a policy to anyone who applies. A criminal record is one of the factors that can increase this risk, and consequently, affect your insurance rates.

Having a criminal record doesn't automatically disqualify you from getting life insurance. However, it can make it more difficult to obtain, and the specifics of your record will matter. Repeat offences, the severity of crimes, and the type of crime can all contribute to application denial. Certain types of crimes, like insurance fraud, are more likely to lead to a denial.

Unlike other risk factors, there is no time limit on criminal convictions. They won't fall off your record after a certain number of years. However, the passage of time will generally work in your favour, and the longer it has been since your conviction, the better your chances of approval and the lower your premium is likely to be.

If you have a criminal record, it is important to be honest about it when applying for life insurance. Lying on your application can lead to severe consequences, including application denial or denial of benefits. Working with an independent broker is a good way to find the best policy for your situation. They can compare guidelines from multiple insurance companies to ensure you get the lowest rates possible.

Health history

When it comes to health, insurers look at a person's overall health, including weight and the presence of pre-existing conditions. They also consider an applicant's medical history, with each insurer viewing specific conditions differently. For example, insurers once routinely declined anyone who had hepatitis C, but new treatments mean that this is now insurable. Similarly, insurers previously often rejected people who had cancer, but now they request more specific information about the type of cancer, how recent it was, and the pathology report.

Insurers also look at an applicant's cholesterol and blood pressure, with cut-offs varying by company. Controlling high blood pressure or cholesterol through medication can help get applicants approved and pay a lower rate.

Height and weight are also important, as they determine a person's body mass index (BMI). People with a high BMI can end up having other medical problems, and insurers generally look for a BMI of 20 to 25 for the preferred rates.

An applicant's family medical history is also taken into account. Insurers generally want to know whether the applicant's parents or siblings died before age 60 from heart disease or certain types of cancer, such as colon cancer, breast cancer, or prostate cancer.

If you're considering applying for life insurance, improving your health through measures such as quitting smoking or losing weight can help you get lower rates.

Lifestyle

When it comes to lifestyle, there are several factors that can influence life insurance rates. These include:

• Occupation and hobbies: Dangerous jobs or hobbies can lead to higher insurance costs. For example, scuba diving, skydiving, or piloting planes are considered risky activities. Life insurance companies may also review your driving record, and major traffic violations such as DUIs or reckless driving convictions can result in higher rates.
• Criminal record: A criminal background, especially a felony conviction, is considered a higher risk by insurance companies. People with criminal histories tend to have shorter life expectancies, which can impact insurance rates. A waiting period of at least a year is generally recommended before applying for life insurance after a felony conviction.
• Financial issues: Recent bankruptcies and credit history are considered by insurance companies when evaluating life insurance applications. Bankruptcies within the last two to five years can affect approval and rates.
• Travel: Travelling to high-risk areas can impact your insurance rates, especially if you travel to areas with high levels of violence or COVID-19 outbreaks.
• Age: Younger individuals are typically considered lower risk and pay lower premiums. As age increases, life insurance rates tend to rise due to the higher likelihood of health issues and a shorter life expectancy.
• Gender: On average, women have longer life expectancies than men, resulting in lower insurance rates.
• Health: Pre-existing health conditions, such as heart disease, cancer, or high blood pressure, can increase insurance rates. Life insurance companies may review your medical records and perform health examinations to assess your health status.
• Tobacco use: Tobacco use, including smoking, chewing tobacco, or vaping, is associated with higher health risks and can significantly increase life insurance costs.
• Family history: A family history of hereditary diseases, particularly early deaths or certain types of cancers and heart disease, can affect insurance rates.

Age

Typically, the premium amount increases on average by about 8% to 10% for every year of age; it can be as low as 5% annually if you're in your 40s, and as high as 12% annually if you're over 50.

With term life insurance, your premium is established when you buy a policy and remains the same every year. With some permanent life insurance policies, the premium rises annually.

Life insurance is designed to pay out a death benefit to the person or persons you name as beneficiaries when you pass away. In exchange for this coverage, you pay a premium to the life insurance company. In the case of term life insurance, you'd pay these premiums for a set term prescribed by the policy. With permanent life insurance coverage, premiums are due as long as the policy remains in effect.

Companies that sell life insurance can use actuarial tables to help set life insurance rates. Actuarial tables are used to estimate life expectancy and mortality rates. These tables, along with other factors, can determine how much you'll pay for life insurance coverage.

Term life insurance policies typically offer lower premium rates compared to permanent life insurance.

If you're considering a whole life or universal policy, the rate of return on the cash value will drive the premium up or down. A higher rate of return on cash value can go a long way toward keeping policy premiums to a minimum. A lower-than-expected return on cash value will require a higher funding amount to keep the policy in force longer. And age is the most important contributor to both term and whole life insurance rates.

Frequently asked questions