Same age. Different gender. Different prices? If you have ever wondered why life insurance companies give different premiums to people, we break down what you need to know when it comes to the premium you receive.
It’s all about the underwriting process
The underwriting process is a pivotal point in your policy application that determines what premiums you get. It is a once-off process that is used by insurers to assess your risk and the eligibility of a client to receive cover. To give you a policy that will adequately cover your needs and the needs of your loved ones, insurers have to take you through the underwriting process to make it fair.
An insurer will ask you a range of questions regarding your health, medical history, weight, age, gender, and lifestyle to assess your risk and how likely it is for you to place a claim. For example, if you have a disease that places your life at risk and increases your chances of placing a claim, your premium is likely to be higher than someone who is healthy and is the same age as you.
Loadings and Exclusions
You may be able to apply for life cover but the process to your application being approved will rely on the underwriting process. Keep in mind that insurers evaluate you on an individual basis to give you something that is tailored for your situation. In some cases, loadings may be added or an exclusion.
Loadings are added when you have a medical condition, illness, or lifestyle choices that can put your life at risk. Therefore, it will increase the premium that you end up paying when compared to a healthy person who does not smoke or excessively drink.
Exclusions are what insurers will not cover because of your health, occupation, or lifestyle. For example, you may be healthy and live a lifestyle that does not compromise your health but work in an environment such as mining that has a high risk of you being critically or fatally wounded.
There are activities and hobbies that insurers do not cover due to the high risk they hold. Should your application be denied, you can always ask your insurer why. Not only will this give insight to red flags that can cause your application to be denied by another insurer, but it can also give you time to improve on things that you can fix.
Honesty is the best policy
Remember that honesty is the best policy. Keep in mind that this is a long-term agreement that you will be entering into with an insurer, and you will want them to payout when you or your loved ones place a claim. The last thing you or your loved ones will want is having your claim denied due to being guilty of non-disclosure.