Insurance is all about figuring out how dangerous something is, and life insurance companies know a lot about how to do that. When a person applies for a life insurance policy, the insurance company decides how much of a risk that person is for their business. This means that the insurance company makes an educated guess about how long the applicant is likely to live and how many insurance premium payments they are likely to make before dying.
Life insurance companies see an applicant as low risk for their business if they think he or she will live a long time and pay a lot of insurance premiums over the course of their lives. But if a person applying for life insurance seems like they might die soon and don't pay their insurance premiums as often as they should, the insurance company will see that person as a higher risk.
How premiums for life insurance are worked out
When figuring out life insurance premiums, life insurance companies look at two things. The first factor is figuring out how likely it is that a person will die at a certain age. This is done by comparing applicants to the average life expectancy. This determines the "average" risk level for each age group. It goes without saying that the closer you are to your average life expectancy, the higher your risk level will be.
The second factor is whether the applicant's average risk level for their age is above or below average. A person who lives an unhealthy life, has health problems that have always been there, and has a stressful job is likely to be considered "above average." On the other hand, someone who regularly works out at the gym, doesn't smoke, and eats a balanced diet is probably seen as "below average." People who are considered "below average risk" will have to pay more for their life insurance premiums based on their age than those who are considered "above average."
Life insurance that costs less?
Even though there isn't always much we can do about pre-existing health conditions, there are ways to get cheaper life insurance. We can do this by changing how we live and finding a better balance between work and life in a stress-free setting. Changing habits can help, but it can work better for some people than for others.
For example, a person in their 20s who lives an unhealthy life is probably less of a risk to insurance companies than the same person in their 50s who lives the same unhealthy life. This is because a 20-year-body old's will respond more quickly to changes in lifestyle than a 50-year-body old's will. So, in the end, there are different levels of being above or below average. This means that figuring out the life insurance premiums for each person is a job for the experts at the life insurance companies.
