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When an insurance company undergoes the process of underwriting an applicant`s life insurance policy, they factor into account anything that may have a bearing upon that individual`s potential life expectancy. At the very minimum, these factors influence the rate of that particular person`s premium. They may also cause the insurer to implement conditions that bear on that individual`s coverage, possibly resulting in the exclusion of certain activities. In fact, coverage may be declined altogether. The underwriting department at any insurance company undergoes a specific process in determining the amount an individual will be expected to pay for coverage.
The age and gender of an applicant has the most bearing on their baseline insurance premium. Every single company that offers life insurance policies has proprietary actuarial tables it utilizes that have been developed based upon its own experiences and claim history to calculate the general life expectancy of each applicant. First and foremost, the age of an applicant provides the underwriting department with a general estimate of how long the premiums will be paid prior to the submission of a death benefit claim. According to statistics, women have a longer life expectancy than men and, as a result, are generally afforded lower life insurance premiums than men seeking coverage who are the same age.
Whether or not the applicant is a smoker or tobacco user plays an important part in the determination of the rate of their insurance coverage. People who smoke cigarettes, cigars, or pipes or those who use chewing tobacco can expect to pay higher life insurance premiums than people who do not use tobacco. This is because the use of tobacco indicates that they have an increased risk of falling victim to cancer at some point. There are a handful of insurance companies that offer something called a "preferred" tobacco rate to those applicantswho are not cigarette smokers, but who do use tobacco in some other form. Discounts are also occasionally extended to individuals who have recently quit smoking.
The overall physical health of an applicant must be determined by a life insurance provider during the underwriting process. While a pre-existing medical condition may not, in fact, lead to an applicant having to pay a higher premium, it may instead cause the insurance company to limit her coverage by attaching it with exclusions and declinations.
More often than not, an insurer will request to have a report on the applicant provided to them by the Medical Information Bureau. The MIB basically acts as a credit reporting agency for insurance companies that provide health and life insurance coverage. If an applicant has any medical conditions, or has undergone any outpatient surgical procedures or an inpatient hospital stay, it will show up on their MIB report. All such listed activity will be closely scrutinized by the insurance provider to determine if coverage will be offered, at what cost and if it will be subjected to any limitations. As with a credit report, individuals are entitled to access a personal copy of their MIB.
The remaining factors that influence an applicant`s life insurance premium are their occupation and their habits and hobbies. As far as occupations go, some carry more risk than others, and insurance rates will reflect this. The insurer will try to determine the likelihood of an applicant dying while on the job.Personal habits are considered by insurers to provide a reliable indication of an individual`s risk. Some habits that can cause premiums to increase are gambling, drug usage, and excessive drinking. Hobbies that can influence rates are extreme sports such as paragliding, scuba diving, and having a private pilot`s license.