As with many types of insurance, you give over your details and then receive a quote. At this point, it can be confusing to know how the information you provided affected the premium you’re being asked to pay.

One of the most significant considerations with life insurance is cost, and we wanted to demystify all the elements that go into it. Join us as we explain what factors influence the costs of life insurance.

Type of Life Insurance Policy

There are two main types of life insurance, and they both have considerably different costs. Let’s look at what they are.

Term – Term life insurance will cover you for a specific period, such as 10 years. Due to the chance of the policy expiring without a payout, this is usually much cheaper. It also doesn’t accumulate a cash value over time.

Permanent – There are a few types of permanent life insurance, such as whole life insurance and universal life insurance. But what they all have in common is they provide coverage for your entire lifetime, and therefore payouts are guaranteed (if all conditions and payments are met). This makes them more expensive.

Age and Gender

Age is a huge factor in the cost of life insurance. It’s an obvious point, but younger people are generally healthier and have longer to live. From the insurer’s point of view, it means they’ll likely be paying their premiums for a longer time. Due to this, the premiums are usually lower.

Everything else being equal, the cheapest time to get life insurance is always as soon as possible. Gender is a smaller factor than age but can still influence the cost. Due to their higher life expectancy, women usually get lower premiums.

Health and Medical History

It stands to reason that the healthier you are, the less you’ll need to pay in premiums. An assessment of your health will be done via a medical examination or a detailed questionnaire. One aspect of the assessment is to see if you have any pre-existing conditions such as heart disease or diabetes.

They’ll also consider family medical history and whether or not you’re more likely to get a condition such as dementia or cancer. Lifestyle choices also go into consideration, with smoking especially being a cause of much higher premiums.

Along with your history, they will also go through a general health assessment. Maintaining a healthy weight and regular exercise can reduce your premiums. It can be tempting to play down medical conditions on an assessment, but this is never wise. Not being truthful can ultimately invalidate your policy.

Occupation and Hobbies

If you work in a high-risk job or engage in dangerous activities, your insurer will see you as a higher risk of premature death. High-risk jobs are ones that involve physical danger such as firefighting, mining, and construction. High-risk hobbies include the likes of skydiving and racing. As with your health, it’s important to fully disclose any hazardous hobbies.

Type of Coverage

We’ve talked about the type of insurance, but the details of the coverage will affect how much you pay as well. You can often choose the death benefit the beneficiaries will receive. The higher it is, the higher the premium.

There are also plenty of riders that can be added to your policy such as critical illness cover, waiver of premium, and accidental death cover. Anything that you add to your policy is going to cost extra.

Financial Stability and Location

Your credit history and your financial stability can also be considered. The insurer wants to be confident that you’ll be able to keep up with payments. A higher risk of financial issues will lead to higher premiums.

Location can play a factor, too. The cost of living, healthcare access, and a province’s average life expectancy can all be added to the equation. Provinces with better healthcare access, such as Ontario, usually offer slightly lower premiums.

How to Get the Lowest Premiums

There are many aspects of the assessment which you can’t control, such as your age. But there are still ways to get lower premiums.

Shop Around – Each insurer assesses risk differently. Make sure to shop around or use a broker to source multiple quotes instead of just one.

Do It Now – Everything being the same, your life insurance will never be cheaper than right now.

Improve Your Health – Quit smoking and lose weight (if applicable). Many companies will consider you a non-smoker if you haven’t smoked in 12 months.

Choose Term – Term life insurance is the cheapest option. It can also be a good bridge to make lifestyle changes before a permanent policy.

Basic Coverage – A low coverage amount with no riders will give you the lowest cost.

Other Methods – Bundling policies with the same insurer, paying annually, and improving your credit score can also reduce your overall cost.

Final Thoughts

There are many factors that influence the costs of life insurance, and thankfully ways of reducing that cost. However, while we all want cheaper insurance, it can often be wise to pay that little bit more to get the exact coverage you need.

By considering all the factors, you can find a policy that provides financial security to your family while still fitting within your budget. If you’re in need of a life insurance quote, then contact Marathon Insurance today and we’ll be happy to help.