you run your instant term life insurance
quote, you'll see a list or rates down
the right side. As life insurance
agents, we take for granted how they got
there and what ultimately determines
them. Maybe, we're jaded that way
but we know they're the best rate on the
market (just look at our
insurance rate guarantee) for
some of the strongest carriers on the
market so we're pretty content.
Being new to the life insurance market,
you may wonder how those rates are
determined. Let's look at what
drives life insurance rates and how to
get the best ones.
quick recap...life insurance is
essentially insuring the loss of income
over a period of time if a person passes
away early. There may be twists
and wrinkles but that's it in a
nutshell. The first determining
factor for your life rates had to do
with general statistics and more
importantly, demographics. To
break it down...what are the
characteristics that lessen or increase
your probability of passing away during
a given period of time. Let's
start with the easy ones. Age.
This is obvious...the older you
are...the more likely that you will pass
away (on average). Gender.
Women (again...that all important term
"on average") live longer than men.
Where you live can affect your risk of
passing away early. Mortality
tables differ from State to State with
some pretty significant variances.
are the easier to understand
rates. Let's now did a
little deeper. There are habits
that on average can severely increase
your chance of passing away.
Smoking, drug use, and excessive
drinking are obvious ones that come to
mind in terms of life insurance.
By now, most people know that smoking is
bad for you but mortality (and morbidity
for that matter) tables directly reflect
just how bad these traits can be.
Your chance of passing away from a given
cancer can increase from double to 23
times that of a non-smoker. Even
an ex smoker has better odds than a
current smoker...although higher than a
non-smoker. Your life insurance
rates will reflect this risk with much
higher term life rates. Drug use
and excessive drinking are similar in
their deleterious effect.
have basic demographics and habits.
What about general health status and
history? This is another critical
determinant to your offer life insurance
premiums. Here's there a wider net
that's cast but most of the issues
directly tie into mortality tables.
For example, acne probably doesn't have
much impact on mortality so it's not a
prime determinant of risk. The two
main killers are tied to either
cardiopulmonary health or cancer so
these are examples of critical
determinants. Any health issue
that corresponds with these or other
contributing health issues will impact
the rates available. This is why
blood pressure, cholesterol, height and
weight information is needed during the
For example, height and weight is
important but the measurement between
your stomach and chest (essentially body
shape) can be a better (or adjacent)
indicator of risk.
are other issues that are use to
determine rates such as family health
history. Unfortunately, large
issues such as cancer, heart disease,
and mental illness have a genetic
component. We have a considerable
impact on whether these genes are
expressed through our habits and general
health maintenance but they will still
ask for this information as it does have
you see that any issue that has a
bearing on the risk of passing away
during a given period of time is
directly figured in the rate offered to
you, but life insurance is about
spreading risk among many people.
So, essentially the
company takes all these
factors for all the people in a given
risk pool. They estimate (which is
too light of a word to explain this
process) how many people are likely to
pass away in a given risk pool and
charge enough term life premium to
accommodate this cost while maintaining
reserves, profits (if for-profit
company), and general company
expense. Life insurance rates are
based on the collective risks of all
those insured in a given risk pool.
In term, our
insurance quoting engine
parses all the options to find the
best-priced plans for your given "risk