Orlando Harmon
Life insurance is an important part of long-term financial planning for individuals and their families. There are many different types of life insurance policies, but they generally fall into two classes: term and cash value. Term life insurance is a policy purchased for a specific period, while cash-value policies have an investment portion that grows over time. Life insurance premiums are based on mortality risk statistics, with high-risk hobbies like SCUBA diving and mountain climbing resulting in higher premiums. Active individuals may want to consider term life insurance for healthy lifestyles, which offers improved options and pricing for those who maintain a healthy lifestyle. Additionally, individuals can tap into home equity and explore the differences between mutual funds and exchange-traded funds to make informed decisions about their financial objectives.
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What You'll Learn
Healthy lifestyle choices
Making healthy lifestyle choices is paramount in maintaining good health and reducing your risk of developing various medical issues. Eating nutritious meals and staying physically active are fundamental aspects of a healthy lifestyle, as they contribute to your overall well-being and longevity. Engaging in regular exercise and consuming a balanced diet can help prevent health problems and extend your lifespan.
When it comes to insurance, adopting healthy lifestyle choices can positively impact your options and pricing for specific insurance plans. For instance, term life insurance premiums are often determined based on mortality risk statistics, and leading a healthy life can result in lower premiums. Insurance companies assess your application, medical records, and, in some cases, your life insurance medical exam results to assign you a risk class. The healthier you are, the lower your risk of premature death, which means the insurance company is less likely to have to pay out a substantial death benefit prematurely.
Additionally, certain hobbies and activities can influence your insurance premiums. High-risk hobbies, such as SCUBAdiving, mountain climbing, backcountry skiing, skydiving, and racing, typically result in higher life insurance premiums due to the increased mortality risk associated with these activities. On the other hand, most recreational hobbies like community softball or cross-stitching are considered low risk and are unlikely to affect your insurance rates.
It's important to note that insurance companies have different underwriting criteria for various activities. For example, rock climbing is underwritten differently by various insurance companies, with some taking a more stringent approach than others. This underscores the importance of working with an agent or advisor who can help you find the most favourable insurance company for your specific needs and risk factors.
Overall, making healthy lifestyle choices not only benefits your physical and mental well-being but can also have financial advantages, including more favourable insurance options and rates. Eating well, staying active, and choosing recreational activities wisely are key aspects of maintaining a healthy lifestyle that can positively impact your insurance journey.
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Hazardous jobs
Life insurance companies evaluate applications, medical records, and medical exam results to assign a risk class. This class determines the premium to be paid by the policyholder. The risk class is based on the likelihood of premature death, which would require the insurance company to pay out a large death benefit.
Certain jobs are deemed hazardous and are considered high-risk by insurance companies. These jobs are more likely to result in fatal accidents, and thus individuals working in these occupations are placed in a lower risk class and are required to pay higher life insurance premiums. Examples of such jobs include loggers, ironworkers, commercial fishermen, farmers, ranchers, airplane pilots, race car drivers, commercial divers, electrical power line repairmen, and construction workers.
It is important to note that not all insurance companies view occupations in the same way. Some companies may not charge flat extra fees for hazardous occupations, and it is possible to find affordable rates. Additionally, if an individual changes from a hazardous job to a less dangerous one, they may request that the insurance company reconsider their risk class and lower their premiums.
High-risk occupations are not limited to specific jobs but can also include specialties within professions. For example, a SWAT team police officer or a smoke-jumping firefighter faces higher risks than other members of their profession. Life insurance companies will take these risk factors into account when determining an individual's risk class and premium.
Living a healthy lifestyle, including regular physical activity, can also impact life insurance options and pricing. Maintaining a healthy lifestyle can lead to improved health outcomes and a longer life expectancy, resulting in lower life insurance premiums.
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High-risk hobbies
Life insurance premiums are largely determined by the insurance companies' perception of risk. This perception is based on a variety of factors, including age, current health status, family history, and career. However, hobbies can also play a significant role in determining life insurance quotes and coverage. Activities deemed "high-risk" may not be covered by life insurance as they increase the likelihood of an insurance claim being made.
Another high-risk hobby is scuba diving, which carries risks such as equipment malfunction, drowning, and decompression sickness. The frequency of dives also matters, with more frequent dives implying greater experience but also a higher risk profile. Deep-sea diving, solo diving, or diving without proper training can result in higher insurance rates or even denial of coverage.
Rock climbing and mountain climbing are also considered high-risk hobbies. Life insurance companies may underwrite these activities differently, with some taking a stricter view. The type of climbing and the presence of safety precautions can impact the assessment of risk. For example, backcountry and heli-skiing are considered more dangerous than resort skiing or marked trail skiing.
Other high-risk hobbies include racing, motocross, and dirt biking, especially when performed off-road or on obstacle-heavy tracks. These activities have higher injury and fatality rates, leading to increased life insurance rates. It is important to note that not all life insurance companies view hobbies in the same way, and some may be more lenient with certain activities.
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Servicemembers' Group Life Insurance (SGLI)
To be eligible for full-time SGLI coverage, you must meet at least one of the following requirements:
- You are an active-duty member of the Army, Navy, Air Force, Space Force, Marines, or Coast Guard.
- You are a commissioned member of the National Oceanic and Atmospheric Administration (NOAA) or the U.S. Public Health Service (USPHS).
- You are a cadet or midshipman of the U.S. military academies.
- You are a member, cadet, or midshipman of the Reserve Officers Training Corps (ROTC) engaged in authorized training and practice cruises.
- You are a member of the Ready Reserve or National Guard, assigned to a unit, and scheduled to perform at least 12 periods of inactive training per year.
Once enrolled in SGLI, you have the option to choose your level of coverage or even refuse coverage altogether. You can also choose your beneficiaries (the individuals who will receive the money from your life insurance policy in the event of your death) and change them as needed through the SGLI Online Enrollment System (SOES). You will pay a monthly premium for SGLI, which will be automatically deducted from your base pay. The current basic SGLI premium rate is 6 cents per $1,000 of insurance coverage, including an additional $1 per month for Traumatic Injury Protection coverage (TSGLI).
When you leave the military, you have the option to convert your SGLI coverage to a permanent, individual insurance policy (such as whole life) within 120 days of your discharge date without needing to provide proof of good health. You may be able to keep your SGLI coverage for up to two years after leaving the military at no cost if you meet certain requirements, such as permanent loss of speech, use of hands, feet, or eyes, or a combination thereof. To apply for an extension in this case, you would need to fill out the SGLI Disability Extension Application (SGLV 8715) and send it to the OSGLI address.
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Universal life insurance
One of the key features of universal life insurance is its investment savings element. The policy has a cash value that can grow over time, similar to a savings account. This cash value earns interest, which can be based on the current market or the policy's minimum interest rate, whichever is greater. Policyholders can borrow against or withdraw from this accumulated cash value, providing them with access to funds during their lifetime. However, it's important to note that unpaid loans or withdrawals will reduce the death benefit paid out to beneficiaries.
The interest rate on universal life insurance policies is not guaranteed and can change frequently. While most policies have a minimum rate to limit potential losses, there is a risk that the cash value may not perform well if interest rates drop. Additionally, withdrawals from the policy may be subject to taxes.
There are different types of universal life insurance policies, such as guaranteed universal life insurance, indexed universal life insurance, and variable universal life insurance, each with its own unique features and risks. It is essential to understand the specifics of each type before choosing the one that best suits your needs.
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