Occupations: Impacting Life Insurance Rates And Policy Coverage

Life insurance is not a one-size-fits-all product, and a person's occupation is one of the many factors that can affect the cost, level, and type of benefits. Occupations are deemed hazardous based on the risk of premature death, with jobs like logging and fishing carrying an obviously higher risk of death due to factors like falling trees or rough seas. Other jobs, like truck drivers and salespeople, are considered high-risk because they require long hours on the road, increasing the risk of accidents or falling asleep at the wheel. Insurance companies compensate for this risk by charging higher premiums, with some companies charging premiums based on occupational categories, and others establishing a flat rate for any occupation deemed hazardous. While life insurance for high-risk jobs may be more expensive, it is still possible to obtain coverage, and working with a broker can help individuals find the best deal.

High-risk jobs

Life insurance providers consider several factors when determining the cost of coverage, and occupation is one of them. Some jobs are considered high-risk and will result in higher premiums. This is because high-risk jobs increase the likelihood of premature death, and insurance companies will need to compensate for the higher risk of having to pay out.

An occupation is generally considered hazardous if it involves a higher risk of sudden or premature death. Some jobs, such as fishing and logging, have an obviously higher risk of death due to factors like falling trees or being swept off a boat. Other jobs are not particularly dangerous in themselves but are considered high-risk because they expose workers to potentially dangerous conditions. For example, truck drivers and on-the-road salespeople are at a higher risk of accidents or falling asleep at the wheel due to long hours on the road.

High-Risk Occupations

According to Forbes, the following are among the most dangerous jobs in America:

• Fishers and related fishing workers
• Airline pilots and flight engineers
• Structural iron and steel workers
• Refuse and recyclable material collectors
• Electrical power-line installers and repairers
• Drivers/sales workers and truck drivers
• Farmers, ranchers, and other agricultural managers
• Construction labourers

Other occupations that are considered hazardous include miners, off-shore oil drilling workers, firefighters, police officers, and members of the armed forces.

How Insurance Companies Compensate for the Risk

Insurance companies use various methods to assess the risk associated with different occupations. Some companies refer to lists of dangerous occupations published by recognised sources, such as the Bureau of Labor Statistics (BLS). Other companies rely on their internal data, even for occupations that are not commonly known to be dangerous.

Most insurance companies will approve policies for people in high-risk occupations but will charge higher premiums to compensate for the increased risk. Some companies set premium rates based on the specific occupation, while others establish a flat rate for any occupation deemed hazardous. For example, they may charge an extra $2 to $3 per $1,000 of coverage.

Group Life Insurance for High-Risk Occupations

Many employers offer group life insurance, which is usually the least expensive type of coverage and is guaranteed due to employment status. However, group life insurance may not be the best option for those in high-risk occupations. The coverage amount is often limited, and if you lose your job, you will also lose your life insurance coverage. There is also a growing trend of employers eliminating benefits through the use of contract work and other arrangements.

Therefore, it is recommended that individuals in high-risk occupations obtain their own life insurance coverage to ensure a base level of permanent coverage, regardless of their employment situation. Combining an employer plan with a private plan can help achieve this goal.

Getting the Best Deal on Life Insurance for High-Risk Occupations

There can be significant variations between insurance companies in their classification of hazardous occupations. While most common hazardous occupations will likely be categorised as such by all companies, there may be differences of opinion for occupations that are considered borderline.

As a result, individuals who believe their occupation could be considered hazardous should work with an experienced life insurance agent. This agent can help navigate the companies that will have the most favourable view of the occupation and may even find some that do not classify the occupation as hazardous at all.

Premiums for high-risk jobs

Life insurance companies are all about risk. If the odds are higher that your application will result in a claim, the higher the cost of your coverage.

How Insurers Determine Risk

When you apply for life insurance, insurance underwriters evaluate several factors, including your occupation and hobbies. They will review your application and may request additional records, such as medical history, driving reports, financial statements, and even a background check. Some applicants will also need to undergo a brief medical exam.

Once you are evaluated, if the insurance company is willing to offer you coverage, they will assign you a specific risk class, also known as a rate class, as this ultimately determines the cost of your life insurance policy.

The most common risk classifications fall into one of three groups: preferred, standard, and substandard. Preferred classes are reserved for the healthiest individuals and offer the best pricing. Standard risk classes are for people with average health and life expectancy. Substandard classes are for high-risk individuals.

In some cases, insurers will charge a flat extra for applicants with high-risk jobs. This is an extra cost that an insurer adds to normal premium fees to compensate for the additional risk the applicant presents, based on mortality rates.

High-Risk Occupations

People in high-risk professions, such as the armed services, should expect to pay more for life insurance because the provider is taking on additional risk by insuring them. This includes people in jobs like:

• Commercial fishing
• Firefighting
• Piloting
• Police work
• Construction
• Trades
• Military
• Oil refinery work
• Mining
• Electrical power-line installation and repair
• Truck driving
• Sales (due to time spent on the road)

Policy Options for High-Risk Jobs

If you work in a high-risk field, getting life insurance might be challenging, but it's not impossible. You should know, however, that your premiums will likely be higher. Here are some of your options:

• Term life insurance is the most popular choice for families due to its simplicity and affordability. You can select a specific term length, usually between 10-40 years, and it is primarily designed for income replacement.
• Permanent life insurance offers lifelong coverage and can include additional features that increase the cost.
• Whole life insurance offers guaranteed death benefits, cash value growth, and fixed rates, making it one of the pricier options.
• Universal life insurance (UL) offers flexibility, allowing adjustments to both death benefits and premiums to accommodate life changes.
• Guaranteed universal life insurance (GUL) provides essential permanent coverage at a more budget-friendly price point without the extra features and associated costs.
• Guaranteed-issue life insurance is a type of permanent insurance that doesn't require any medical underwriting and is typically available to people aged 50-80.
• Accidental death insurance may be an option if you can't get traditional life insurance. This policy provides a death benefit if you die due to an accident, but not if you die due to illness.

How insurers determine risk

When you apply for life insurance, insurance underwriters evaluate a number of factors to determine your risk class, also known as a rate class. This evaluation will impact the cost of your life insurance policy. While the specific factors used to determine risk may vary between insurers, common factors include:

• Occupation: Some occupations are considered high-risk due to an increased possibility of premature death. For example, fishing and logging carry a higher risk of death due to factors such as falling trees or rough seas. Other jobs may not be inherently dangerous but are considered high-risk because they expose workers to hazardous conditions, such as truck drivers and salespeople who spend a lot of time on the road.
• Hobbies: Engaging in dangerous hobbies like bungee jumping can also increase your risk classification.
• Medical History: Insurers may request access to your medical records to assess any pre-existing health conditions that could impact your longevity.
• Driving Reports: Your driving history can indicate the likelihood of road accidents, which is relevant for occupations or hobbies that involve driving.
• Financial Statements: Financial stability may be considered as a factor in your overall risk profile.
• Background Check: A background check may be conducted to assess any potential risks associated with your personal history.
• Smoking Status: Smoking is a well-known lifestyle factor that increases the cost of life insurance premiums due to the associated health risks.
• Age: Your age is a significant factor in determining risk, as older individuals are generally considered higher risk.

Once all the relevant factors have been evaluated, the insurer will assign you to a specific risk class, typically categorised as preferred, standard, or substandard. Preferred classes are for the healthiest individuals with the lowest risk, while substandard classes are for those with higher risk factors.

High-risk jobs and permanent life insurance

Permanent life insurance is a type of life insurance that provides coverage for your entire life. It also has a cash value component that earns interest, making it a good option for those looking to diversify their investment portfolio. Due to these reasons, whole life insurance is significantly more expensive than a comparable term life policy.

If you have a high-risk job, permanent life insurance may be a good option for you, as it can provide financial security for your loved ones in the event of your untimely death. Here are some things to keep in mind when considering permanent life insurance for high-risk occupations:

Cost of Coverage

High-risk occupations, such as those in the armed services, fishing, logging, construction, and law enforcement, often result in higher life insurance premiums. This is because insurers consider the likelihood of paying out a claim to be higher for individuals in these occupations. However, the cost of coverage is not set in stone and can vary depending on the insurance company and the specific nature of your job.

Availability of Coverage

While having a high-risk job may result in higher premiums, obtaining a policy is usually still possible. Some insurance companies may be more lenient towards certain high-risk occupations than others, so it is important to shop around and compare quotes from multiple insurers. Working with an independent insurance broker can help you find the best policy for your needs and budget.

Underwriting Process

When applying for permanent life insurance, you will undergo an underwriting process where the insurer will evaluate your risk factors and determine your risk class. The risk class will then correspond to the amount you'll pay in premiums. It is important to be honest about the nature of your work during this process, as providing inaccurate information could result in your claim being denied.

Policy Limitations and Exclusions

Some permanent life insurance policies may have limitations or exclusions related to occupational hazards. For example, there may be restrictions on coverage for certain high-risk activities or locations. It is important to carefully review the terms and conditions of the policy to understand any potential limitations or exclusions.

Alternative Options

If you are unable to obtain affordable permanent life insurance due to your high-risk job, there are alternative options available. Guaranteed issue life insurance, for example, does not require a medical exam or consider risk factors. However, these policies often have a low cap on the death benefit and may be more expensive than traditional life insurance.

In conclusion, while having a high-risk job may impact the cost and availability of permanent life insurance, there are still options available to ensure you have the necessary financial protection for your loved ones. It is important to shop around, compare quotes, and work with an independent broker to find the best policy for your unique situation.

Group life insurance

A person's occupation can affect their life insurance, with many factors influencing a life insurance policy, and one's job is one of them. People in high-risk professions, such as the armed services, are likely to pay more for life insurance because the provider takes on additional risk by insuring them.

• Cost and Coverage: Group life insurance is typically more affordable than individual life insurance policies. The cost of the coverage is usually shared between the employer and the employee, with the employer covering a significant portion. This makes it a cost-effective way for individuals to obtain life insurance protection. However, the coverage amount may be limited and is often tied to the employee's annual salary.
• Enrollment and Eligibility: In many cases, group life insurance is automatically provided to eligible employees, with the premiums deducted from their payroll. This means that employees can obtain life insurance coverage without having to go through a separate application process. Most employees are eligible for this coverage, making it accessible to a large number of people.
• Portability and Continuation: One limitation of group life insurance is that it is often tied to the individual's employment. If an employee leaves the company, their group life insurance coverage may end or need to be converted to an individual policy. This can create a gap in coverage and cause inconvenience during job changes.
• Supplemental Coverage: Group life insurance may not always provide sufficient coverage, especially for individuals with higher income levels or greater financial responsibilities. In such cases, employees can purchase additional voluntary life insurance on top of the group coverage. This allows them to increase their overall life insurance protection without undergoing full underwriting.
• Federal and Government Programs: Certain governments and organizations offer group life insurance programs for their employees. For example, the Federal Employees' Group Life Insurance (FEGLI) Program in the United States covers over 4 million federal employees, retirees, and their family members. Similarly, Servicemembers' Group Life Insurance (SGLI) offers low-cost term coverage to eligible service members in the military.

Frequently asked questions