When determining life insurance approval and how much an applicant has to pay, risk class is the deciding factor. The person who reviews and evaluates an application and determines an individual’s risk class is an underwriter. Your health is one of most obvious factors that determine your risk class, but another little-known factor is avocations, or hobbies.
When you apply for life insurance, you don’t have to list all your hobbies like sewing or fishing, but there are typically questions that ask about specific risky hobbies. In this blog post we’re going to review the top five most frequently encountered hobbies that can affect your insurance pricing.
Note: These avocations only affect the purchase of new life insurance. If you already have an active life insurance policy and start participating in any of these sports afterwards, your rates will not and cannot be changed. This is one of the benefits of buying life insurance early so you can lock in low premiums.
It may be a surprise to learn that your hobbies can affect the price of life insurance. Hobbies are referred to as avocations in the industry.
If you participate in a hobby that can be deemed risky, your life insurance premiums will be higher than the average person’s. Depending on the mortality risk associated with the hobby, your risk class will be affected or you may be required to pay a flat extra, or you may be declined altogether.
Not all life insurance companies view hobbies in the same light, however. Some companies are more lenient with certain hobbies than others. When you apply for life insurance through Quotacy, your agent will review your application to make sure you’re matched with the best insurance company for your situation.
Exploring the deep blue sea comes with potentially life-threatening hazards such as:
- Can result in severe pain and even injury to the middle ear
- Decompression Sickness
- Often called “the bends”
- Can range from aching joints or a skin rash to paralysis and death
- Nitrogen Narcosis
- Impairs judgment and sensory perception
- Oxygen toxicity
- Effects range from tunnel vision and/or nausea to twitching to loss of consciousness and/or seizures
- Pulmonary embolism
- Can cause the lungs to swell and even pop
- Sea life
- While most sea creatures are not aggressive towards divers and attacks are extremely rare, incidents do happen.
- Defective equipment
- Borrowed or rented equipment may present an added risk to the diver because of unfamiliarity with use and/or the potential for failure.
Generally, the deeper the dive, the more risk you take. Also, diving into caves or the interior of a sunken ship is more risky than open water diving. If you’re a scuba enthusiast applying for life insurance, underwriters will want to know the following:
- Your training and experience
- If you ever dive unaccompanied
- Your certification level
- If you participate in specialty dives (i.e. wreck diving, cave diving, treasure trove diving)
- How often you scuba
- Whether you own or rent equipment
- How deep you dive
- The sites you frequent
It’s rare that an applicant would be declined coverage based on scuba activities alone, but it is not uncommon to be charged a flat extra if you dive often (typically more than 10 times per year) or dive deep (typically over 100 feet.) A flat extra is padding for a life insurance company when there is risk involved that doesn’t quite meet their regular rating system.
In mountain climbing, risk is based on the difficulty of the climb (i.e. height, grade, presence of snow and/or ice, weather conditions), as well as the skill, experience, and judgment of the climber. In addition, risk is also affected by the availability of rescue equipment and facilities if needed.
Risks to be aware of:
- Exposure to infectious diseases if you’re in a remote part of the world.
- Sudden changes in weather conditions can cause climbers to become trapped, with the risk of hypothermia.
- Mountain climbing is a physically strenuous sport and if you are not in good physical condition, unexpected situations may present a real hazard.
- Acute mountain sickness is common at elevations as low as 10,000 feet and may require descending to a lower elevation to acclimatize.
- At higher elevations, breathing becomes more difficult. Severe headaches, angina, strokes and the inability to react quickly or make good judgments may also be experienced.
If you’re a climbing enthusiast applying for life insurance, underwriters will want to know the following:
- Level of difficulty, aids used, and location
- Your age, training, and experience
- Frequency and height of climbs
- YDS difficulty class
- The terrain (water/ice/mixed grade)
- Time of year/weather conditions
- Extreme altitudes
- Skill of climbing partners
- Foreign country or travel
- Rescue capabilities
Flat extras are no stranger to applicants who often mountain climb, and to those who climb to 25,000 feet and beyond, a decline is likely.
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Back Country and Heli-Skiing
Back country skiing is done in off-trail, in unmarked and unpatrolled areas that may or may not be within a particular ski area’s boundaries. Risks include possible avalanche, changes in weather, tree wells (loose area around trees that catch the skier unaware) and terrain.
Heli-skiing is off-trail downhill skiing or snowboarding that is accessed by a helicopter. The risks present for the heli-skier include those of back country skiing, plus those of the helicopter flight over rugged terrain.
If you back country or heli-ski less than seven days per year and you only go through a tour operator or professional guide, then it’s possible for you to be underwritten as standard risk or even preferred. If you go more than seven days, you’ll be likely saddled with a flat extra. If you go independently without a professional guide, you’ll likely be declined.
Skydiving / Hang Gliding / Paragliding
In the world of life insurance underwriting, skydiving, hang gliding, and paragliding are all categorized under “aviation related sports.” For all of these activities, your chances of an accident occurring is what makes them deemed high-risk.
- Aircraft failure or pilot error
- Candling (parachute twist resulting in closure of parachute)
- Failure of main and emergency parachutes
- Problem parachute landings resulting in fractures or more serious conditions
- Collisions with other sky surfers
Hang gliding comes with a few more additional risks such as the location in which you’re gliding (mountains versus gentle slopes).
Preferred ratings are available to skydiving applicants who only do tandem jumps (versus solo). For hang gliders and paragliders, however, flat extras are more common.
Although safety standards in motor sports continue to rise, it will never be a completely risk-free sport. There are generally three types of hazards in racing:
- Speed of the vehicle – depends mainly on engine power, aerodynamics and weight of the vehicle. The type and nature of circuit/venue can also promote or restrict potential speeds.
- Design and construction of the vehicle – open wheeled vehicles (e.g. Indy) are more likely to tip over (roll) due to entangling of wheels. Open construction vehicles (e.g. Indy) provide limited protection to the driver’s head; the rest of the driver’s body is usually well protected by a ‘survival cell’. Closed construction vehicles (e.g. stock cars) envelop and protect the driver more, although the driver’s head is often in close proximity to the tubular steel cage.
- Degree of exposure – professional drivers will test drive significantly more than amateurs and therefore have two or three times the exposure to potential risks.
Motorcycle racing is also considered in the motor sports category. Car racers have the added protection of the body of a car than one who races on a motorcycle. Therefore, a motorcycle racer would present a greater risk when applying for life insurance.
Overall, the level of risk associated with racing depends primarily on:
- Age and experience
- Potential speed of the vehicle
- Type and level of competition involved
- Number of events undertaken each year
- Accident record
- Type of race, speed and engine capacity of the vehicle
If you’re a stock car racing enthusiast and only participate in local races a few times per year, it’s possible to get preferred ratings. The more significant the activity and the more frequently you participate, the more likely you will be required to pay a flat extra.
Throughout reading these summaries of how certain avocations are underwritten, we have talked about flat extras. I’ll add in an example of how a flat extra works since it’s not common knowledge.
How a Flat Extra Works:
Jane Smith is a healthy, 32-year-old woman applying for a $500,000 30-year term policy. By day Jane is a paralegal but on the occasional weekend she climbs mountains. While Jane doesn’t hike mountains with elevations of over 20,000 feet, she occasionally will need to use an ice axe and crampons to combat icy conditions.
The life insurer approves Jane at Preferred with a permanent $3 flat extra per thousand.
Price-wise, here’s what that means:
If Jane didn’t climb mountains, her 30-year $500,000 policy with a Preferred risk class would cost about $36 per month. But because she does climb and was given a permanent $3 flat extra, to calculate her premiums you have to multiply 3 by 500 (hence “per thousand”) and add this to the annual total.
3 x 500 = 1500 which means Jane needs to pay an extra $1500 per year, so instead of $36 per month Jane will be paying about $161 per month.
However, life insurance companies realize you likely won’t climb mountains forever. If Jane stops climbing mountains five years after her policy is placed inforce, or activated, she can ask the insurance company for a reconsideration. Essentially, Jane can ask them to drop the flat extra since that risk is no longer valid. After evaluating her request, if the insurance company approves, her monthly premiums would then drop down to $36.
In some cases, the flat extra may drop but the premiums increase because of a health change. For example, if Jane was told by her doctors that she needed to stop climbing because of a respiratory condition, the underwriters would not be able to overlook that.
It’s free to apply for life insurance. So, even if you think your extreme hobby may get you declined, you won’t know until you try. You may be surprised.
Keep in mind that not everyone is underwritten the same and not all insurance companies follow the same underwriting guidelines. While one company may require a flat extra of $5 per thousand another may only ask for $2.50 or not even require one at all. This is the benefit to working with an independent broker like Quotacy. We work with many different carriers and can shop your case around if necessary so you get the best possible outcome.