When you want to take out life insurance, it can sometimes be hard to figure out how much you’ll pay for the peace of mind that your cover gives you. So how exactly are life insurance premiums calculated?
The truth is that life insurers and their underwriting departments all have their own ways of calculating premiums. When it comes to life insurance providers though, the amount that you pay is based on your potential risk (or how likely you are to pass away) which can affect your life insurance quote. It is up to the insurers to judge this, normally based on a variety of risk factors.
A risk factor can be almost anything that affects your health or lifestyle status. Typically, major risk factors that life insurance companies take into consideration when they calculate your life insurance premiums include your age, weight in proportion to your height (or BMI), smoking status and general health.
They’re also likely to consider any previous or existing health issues such as cancer, diabetes, high blood pressure, HIV or any hospitalisations or intensive medical treatment. Some companies will consider the area that you live, or the type of job that you do – a firefighter or soldier might have higher premiums than someone working in an office job, for instance.
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It’s very important to be honest with your life insurer when you are providing your information to them, as leaving out any information or lying about your health could mean that should you pass away, your policy becomes invalid. This means that your beneficiaries will not be able to claim from your policy.
These risk factors are weighted differently by each life insurance provider so you may find that you get a cheaper rate at Company B with a super-high premium at Company A, while your best friend gets a better deal at Company A.
Of course, there is one more major influence on your premium prices. Naturally, the amount of cover that you want to take out will also have a big impact on your premiums. The higher the cover, the higher the premium; so taking out 1 million rand in cover will result in a higher premium than taking out R300 000.
MiWayLife is always trying to find ways to provide life insurance to everyday South Africans, even to individuals who we previously weren’t able to cover. To find out about our combined funeral and life policy with one affordable premium, click here to leave your details and get a quote.