What are life insurance risk factors?
Thinking of people as a whole, some are healthier than others. Within each age group, the probability of death is greater for some than others. These differences in risk stem from one’s physical condition, occupation, sex, and other factors—we’ll get into these more a bit later.
Long story short, your risk of dying is not based on age alone.
Life insurance companies decide how much your life insurance policy will cost based on risk factors. The more risk factors you have, the more you pay. It doesn’t make sense to allow someone with a greater probability of death to pay the same as someone who likely won’t die for another handful of decades.
The life insurance companies have established a range of mortality expectations in which someone would be considered an average risk and would then pay a standard rate for life insurance. Individuals who have fewer risks than the average would then pay less for life insurance—preferred rates. Individuals who have more risks than the average would pay more—substandard rates.
Factors Affecting Risk
In order for an insurance company to determine what risk class an applicant is, they rely on evaluating factors that may impact an applicant’s longevity.
These risk factors include:
The cost of life insurance is determined by your level of risk, based on actuarial guidelines. Life insurance actuaries calculate how different risk factors affect a person’s mortality. The riskier you are to insure, the higher your life insurance premiums will be.
Your age, gender, medical history, occupation, and even your hobbies can carry a certain level of risk. When you apply for life insurance, these factors are evaluated and your risk class is determined. Not every life insurance company evaluates particular risk factors in the same way. Some are more lenient than others, depending on the company’s history with a particular risk.
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.
Your age is the most important single factor in measuring probability of death. When you apply, you are placed into the proper age grouping and then your other risk factors are compared to that of the norm within your age class.
All insurance companies have a minimum and maximum age range in which you can be eligible to apply for coverage. Depending on the company, some maximum ages can be as low as 60 and some as high as 80. Regardless of any other factors, if you apply with a company and are over their maximum age, they will deem you uninsurable. If you are younger than their minimum age (typically 18 or 20 years old) you’ll have to wait until you’re at a proper age.
Your build—the relationship between your height and weight—is one of the more basic determinants in determining probability of death. Build charts may vary slightly across life insurance companies, but the table below is one example.
If you are within an average height/weight range, then your build is a neutral factor. However, if your height/weight is beyond the average, then this may cause you to move into a substandard risk class.
Life insurance companies will want to know if you have any impairments of the body or mind that may shorten your life expectancy. Specific health questions are asked on the application and, if necessary, medical records are ordered and a medical exam may be required. The primary purpose of the medical exam is to detect any malfunctioning of vital organs. A blood test and urinalysis help to determine this.
Life insurance companies will typically not offer coverage if you are scheduled for any diagnostic testing or surgery, currently under treatment for any condition, or have not fully recovered from an illness.
It’s not a secret that smoking is bad for your health. If you smoke cigarettes, you’re going to be classified in a Tobacco risk class and you’re going to pay more for life insurance.
» Learn more: Life Insurance Risk Classes for Cigarette Smokers.
Pipe smoking, chewing tobacco, electronic cigarettes, cigars, smoking cessation products (e.g. Nicorette gum) and marijuana use are all viewed a bit differently depending on the insurance company.
» Learn more: Life Insurance for Tobacco, Nicotine, and Marijuana Users.
Some life insurance companies may qualify you for a non-tobacco risk class and some may keep you in a tobacco risk class—the more companies you have access to, the better your chances for a lower premium. It’s one of the many reasons to work with an independent agency (like Quotacy) versus a captive agency who only works with one life insurance company.
Applications often ask questions regarding:
- Past habits
- Previous environments
- Current insurance status
Life insurance companies will also want to know if you use any drugs or drink alcohol. Companies will take a hard look at any past abuse of drugs or alcohol, as this may have caused irreparable damage to the body. Any current use of hard drugs will cause an automatic decline. Marijuana use varies from company to company. Moderate alcohol use is not concerning, but heavy drinking is. There is a substantial mortality risk among heavy drinkers.
Personal history may also reveal potentially concerning living or working environments. For example, if an applicant recently left a hazardous job, there is a possibility that his or her health was affected.
Life insurance companies also want to know if you currently have a life insurance policy or have been declined for one in the past. If there is a current active policy, this affects how much coverage you can be approved for. If you have been declined in the past, the reason(s) why may still exist.
Because certain medical conditions are hereditary, family history plays a role in life insurance as well. When you apply for life insurance, you are asked about the ages and health status of your parents and siblings. If any are deceased, the age they died and their cause of death will also be asked.
When determining an applicant’s risk class, a very good family history will be a credit and a very poor family history may be a few points against your overall evaluation.
There are jobs which can be considered hazardous and come with a shortened life expectancy. They may be considered hazardous because there’s a higher chance of an accident occurring—for example, construction workers—or it’s an unhealthy working environment—for example, miners.
All life insurance companies have occupational manuals which list the occupations deemed to have an adverse effect on mortality. If you work in one of the listed occupations, you will likely be required to pay a higher premium.
If you purchase a policy and were paying a higher rate because of your job, but then change to a less hazardous one, you may ask the life insurance company for a reconsideration. Depending on the circumstances, it’s likely they will agree to move you into a better risk class and decrease your premiums.
Mortality rates vary throughout the world. If you are contemplating foreign travel or residence, the life insurance company will want to know when, where, and for how long. They also want to know if you have recently traveled to or lived in a foreign country. A particular country’s climate, living standards, sanitary conditions, medical care, political stability, and terrorist risk can all have an effect on your mortality.
You can learn more about how life insurance companies evaluate foreign travel in this blog post: Foreign Travel and Life Insurance.
You can learn more about how life insurance companies evaluate applicants who are non-U.S. citizens in this blog post: Life Insurance for Non-US Citizens.
You can learn more about how life insurance companies evaluate applicants who are non-U.S. residents in this blog post: Life Insurance for Non-U.S. Residents.
Statistically speaking, women live longer than men. According to the Centers for Disease Control and Prevention (CDC), the life expectancy for women is 4.9 years higher than men.
There are many reasons for this; some of the main ones being that women, overall, are more health conscious and more willing to see a doctor when needed. Women also are less prone to risky behavior compared to men.
Life insurance is all about life expectancy so women pay lower premiums—except in the state of Montana where they have an insurance unisex law.
Back in the day, any form of flying was considered extremely hazardous and most life insurance companies would either force the applicant to pay an exorbitant amount or they would add an aviation exclusion clause to the policy, in other words, if you died as the result of a plane crash, your beneficiaries wouldn’t receive the death benefit.
With technological developments and improved safety requirements, air travel has become extremely common and far less risky. Life insurance companies no longer impose any restrictions to passengers or crew members of airliners; however, companies will still take a closer look at private pilots and crew members of military aircraft.
When evaluating private pilot applicants, life insurance companies will look at the applicant’s age, experience, training, and the amount of flying he or she participates in. The application of a crew member of a military aircraft will be evaluated based on their age and type of duty.
Like occupations, certain avocations (i.e. hobbies) are considered hazardous. The most common of these are racing, sky diving, scuba diving, and mountain climbing.
» Learn more: The Five Most Common “Risky” Hobbies That Underwriters See.
If you apply for life insurance and are somewhat of a daredevil, you may have a flat extra added onto your premium. A flat extra is an additional fee you pay that cushions the risk the life insurance company takes by insuring you. These flat extras typically range from $3-10 per every $1000 of coverage.
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 insurance company 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.
Similar to occupations, if you are paying more for your policy because of a specific risky hobby, but then stop doing said hobby, you can ask the life insurance company for a reconsideration.
As you have read, life insurance companies are very thorough. Not all life insurance companies evaluate, i.e. underwrite, risk factors in the same manner however. The life insurance industry is very competitive and in order to stand out, different life insurance companies focus on different health or lifestyle niches. For example, AIG is excellent for foreign national applicants and Banner Life is excellent for pregnant applicants.
» Learn more: Reviews of Top Rated Life Insurance Companies
Quotacy works with many of the best rated national life insurance companies and we’re ready to help you find the best life insurance policy. Start the process by getting a free term quote today—no personal contact information required.
Watch the Life Insurance Risk Factors Video
Welcome to Quotacy’s Q&A Friday where we answer your life insurance questions. Quotacy is an online life insurance broker where you can get life insurance on your terms.
I’m Jeanna and I’m Natasha.
Today’s question is:
What are life insurance risk factors?
Well, when it comes to buying anything, cost is usually one of the most important deciding factors and life insurance is no different.
But unlike generic items such as a flat-screen TV or a new pair of boots the cost of life insurance is heavily dependent on you. If you and your friend both go into a shoe store and buy the same pair of boots, you’ll both pay the same price.
If you and your friend both apply for the same life insurance policy you likely will not pay the same price and this is because your individual risk factors are what determines your life insurance premiums.
» Compare: Term life insurance quotes
There are quite a few factors life insurance companies evaluate to determine how much you’ll pay. The most common ones are your gender, age, health, build, family history, job, and hobbies.
Let’s talk about each one briefly.
Why does your gender matter when you’re applying for life insurance?
Statistically, women live longer than men do. Women, on average, are more willing to go to the doctor if they aren’t feeling well. And they are less prone to risky behavior. Therefore, life insurance companies see them as a lower risk and they pay less for life insurance than men do.
Age also affects how much you’ll pay for life insurance because the older you are, the closer you are to death.
Right. Age is one of the most important factors in measuring probability of death and probability of death is what life insurance companies base their premiums on. So, a 30-year-old would pay less for life insurance than a 60-year-old.
Your health can also greatly affect your longevity and the same thing with build, which is the relationship between your height and weight. If you’re extremely overweight or underweight it can cause health problems. And severe health problems can decrease your life expectancy so, again, life insurance companies take these factors seriously.
Family’s Health History
But not only does your health play a role, but your family’s can too. Because certain medical conditions are hereditary, when you apply for life insurance it’s common for companies to ask if you have a parent or sibling that has been diagnosed or died from heart disease, diabetes, or cancer.
But just because you had a family member with a health problem doesn’t mean your premiums automatically increase. The type of medical condition and how late in life your family member was diagnosed would be considered.
There are also certain family history medical conditions that don’t affect your evaluation whatsoever.
For example, if you’re a male applying for life insurance and your mother died from ovarian cancer the insurance company will disregard this because as a male you can’t get ovarian cancer.
Job and Hobbies
Two more factors that have similar effects are your job and hobbies.
People are sometimes surprised to learn that their job and hobbies can affect their life insurance costs. If you have a hazardous job or participate in risky activities your life insurance premium may be higher because of it.
For example, a construction worker works in an industry that typically has more on-the-job accidents than a teacher. So, the construction worker will likely pay higher premiums than the teacher. And someone who rock climbs for fun on the weekend will pay higher premiums than the guy who simply goes fishing.
However, if you buy a life insurance policy and then later in life change jobs or stop that risky hobby you can go to the life insurance company and ask for a reconsideration. A reconsideration is when the life insurance company reviews your current situation and if they believe that particular risk is no longer relevant they may be willing to decrease your premiums.
» Calculate: Life insurance needs calculator
All of these factors can affect the final cost of your life insurance policy. But not every life insurance company evaluates these factors in the same way. The life insurance industry is very competitive and to stand out different carriers cater to different niches.
The tricky part is, how is someone supposed to know which company is best for them? It would take a lot of time to do this kind of in-depth research for every single life insurance company.
Which is why if you have a health or lifestyle risk factor, a life insurance broker is your best bet. Quotacy is a broker and this means we have access to multiple life insurance companies and we aren’t tied to any of them.
We’re completely independent. Our agents will review your application and shop your case to find the best company option for you.
And because Quotacy is an independent broker, we ultimately don’t care which insurance company you apply to so we won’t push you towards any one company if there’s a better choice for you.
After you apply online through our website, your agent will review your application. If they see you have a risk factor that might affect your final price, they’ll shop your case and present their findings. The route you take is 100% up to you.
If you’re a healthy individual and have no risk factors that stand out your agent will simply push your application through to the original insurance company you picked on our website.
This is why if you’re not sure which insurance company to pick we typically recommend you just go with the least expensive choice since on the back-end our agents make sure you end up with the best price anyway.
If you have any questions about life insurance, make sure to leave us a comment. And if you’re ready to get quotes check out Quotacy.com. We’re here to help you find the best deal on the life insurance you want.
About the writer
Natasha Cornelius, CLU
Senior Editor and Life Insurance Expert
Natasha Cornelius, CLU, is a writer, editor, and life insurance researcher for Quotacy.com where her goal is to make life insurance more transparent and easier to understand. She has been in the life insurance industry since 2010 and has been writing about life insurance since 2014. Natasha earned her Chartered Life Underwriter designation in 2022. She is also co-host of Quotacy’s YouTube series. Connect with her on LinkedIn.