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Understanding what aspects increase or decrease life insurance rates is very important because it means you will be able to get better coverage to make sure your family and loved ones have enough financial protection if anything happens to you. The infographic below offers an overview of the top things that can hijack your rates.
How does each item impact your rates? Read on to find out more.
Here you can download this infographic as a PDF.
Life Insurance Rates and Your Consumer Profile
1. Gender: Did you know that women pay about 25 per cent less for their insurance than men? Don’t think about changing genders just to save on insurance! Insurers consider your born-with gender when creating your policy.
2. Age: Being young has many advantages, especially when it comes to life insurance. Apply early (18 – 30) to get the best rates. For example, a Term 20 life insurance policy with coverage of $500,000 for a non-smoking female costs about $23/month when purchased at age of 25. If you are 45, the same policy will cost you around $32/month. If you are 55, be prepared to pay rates of $90/month. Be careful of “age rounding” when applying. If you are going to be 30 on December 31, buy your policy between January and May so your age will be rounded to 29. If you purchase from June to December, your age will be rounded to 30.
3. Physical condition (form): Insurance companies are very interested in your physical condition when setting up your insurance premiums. They use the BMI (body-mass-index chart) to determine if you are overweight or obese. Being overweight affects your premium.
4. Personal medical record (history): It matters what your medical history looked like in the past, but even more important is your current health condition. Some existing diagnoses and pre-conditions can affect your life insurance rates.
5. Pre-conditions: If you have any pre-existing health conditions such as a history of heart attacks, diabetes, multiple sclerosis or HIV, getting life insurance becomes more expensive. Despite the widespread opinion that people with preconditions don’t qualify for life insurance, multiple insurance products are available. Our informative site about no medical life insurance helps people with pre-conditions learn more about their insurance options. Each insurer has its own underwriting protocol so make sure that you check with an independent broker to see what rates, deals and offers are available to you.
Free, no-obligation life insurance quote for you
6. Depression: A history of depression is considered a precondition. Your life insurance premiums can be up to two times more expensive if you have history of serious depression. If you do not qualify for traditional life insurance because of serious (not mild or resolved) depression, simplified or guaranteed issue policies are an option.
7. Family history: It is not only your health history that matters for life insurance, but also your family history. If somebody in your immediate family had a history of diabetes, cancer or other serious pre-conditions, there is a high chance, from a risk-assessment perspective, that you will face the same health issues.
Life Insurance Rates and Your Personal Habits
8. Smoking: Want a great rate? Stop smoking at least a year before you apply for life insurance. If you are a smoker, your premiums will double. By the way, more than one cigar a month gets you the smoker’s rate. Our life insurance navigator tool shows that a 45 years old male non-smoker would pay $48/month for a Term 10 life insurance policy. Should this male be a smoker, his rate will jump to $123/month with all the other variables staying the same.
9. Drinking habits: Drop the 3-4 beer-a-day habit if you want a good rate. Otherwise, the insurer assumes you have a drinking problem – and can increase your life insurance rates by up to 50 per cent.
10. Driving history: If you have a terrible driving record, you may want to wait until some demerits fall off your record before you apply for life insurance. Bad drivers are punished with a premium rate up to 50 per cent higher over what a good driver pays.
11. Travel to dangerous locations: Should you have a history of travelling to dangerous countries such as Sudan, Afghanistan, Niger, Honduras, Iraq and Somalia, your life insurance might be declined. Many insurance companies have different wording and guidelines in their questions, so check with your independent broker for the best deal.
12. Dangerous sports (eXtreme sports): If you are professionally involved in such dangerous sports such as sky diving, bungee jumping or alpine skiing, you will see your life insurance rates go up.
13. Job: Your occupation does not generally have an impact but certain occupations, such as MMA fighter, professional athlete, exotic dancer and helicopter pilot, may not qualify for traditional, fully underwritten life insurance.
14. Memberships: Are you a member of Certified Management Accountants of Canada, The Air Canada Pilots Association or other group? You might qualify for a discount. Ask your insurance broker if your membership association can save you money on life insurance. Also, If you are an alumni of particular universities or colleges, some insurers will reward you with a discount. Sometimes being part of a union can save you money on life insurance. Check with your union to see if you qualify for a discount.
Life Insurance Rates and Your Financial Knowledge
15. Shop around and compare: It pays to shop around. With more than 30 life insurance companies competing for your business, you can get a great deal by simply checking out your options.
16. Insurance bundle: Bundle as many products as you can with a single insurer to take advantage of a bundle discount. Depending on the provider, you may be able to get everything from life to auto insurance from the same insurer.
17. Annual vs monthly payments: Annual payments save insurance companies administration costs; if you make one lump sum payment you may get lower life insurance rates as a reward.
18. Annual review: Life changes fast. New vehicles, new babies, renovations to the house – all these things affect your life insurance policy. Review your coverage every year. You could be eligible for new discounts, or you may need more coverage.
19. Loyalty: Staying for a long time with one company is often beneficial, though you should keep an eye on renewals as many life insurance policies renew at much higher premiums.
20. Work with a broker: Navigating through the many different coverage options, rates, riders, discounts and little-known insurance facts is daunting. Skip the headache and get your insurance through a broker. These experts shop the market for you and since they get commission from insurers when they sell a policy, it doesn’t cost you a dime for their services. They have access to all the products on the market – not just ones from a single agency – and it is in their best interest to act in your best interest.
Life Insurance Rates and Your Insurance Policy
21. Policy type: Life insurance comes in different policy types: term life insurance, whole life insurance, universal life insurance, etc. These policies vary in terms of price and cash accumulation components. Term life insurance policies are typically the cheapest since they only protect your beneficiaries in case of your death but do not have cash accumulation component. Have a look at this comparison of term life and whole life insurance policies by SuzeOrman.
22. Length of policy: The shorter your policy length (time when you are covered), the cheaper the policy. For example, a Term 10 insurance policy covers you for 10 years and Term 20 for 20 years. Typically you want to have coverage long enough that your family and close ones are protected if something happens to you. If you have young kids, you might want consider getting a Term 20 policy.
23. Coverage size: Despite the fact that many Canadians have a life insurance policy, the coverage amount is usually not large enough. One of our other publications points out the costs of raising one child in Canada to the age of 18 – it is about $250K. Thus, make sure that you have enough coverage. If you are looking for a simple funeral life insurance to protect your loved ones against unexpected final expenses after your death, a coverage of $15-30k should be enough.
24. Return of premiums: Some policies allow you to reclaim some of your premium if you don’t make a claim. Check with your broker to see how much you can save. Paying a little more for a policy upfront can make sense if you can reclaim part of the premium at a later date.
25. Cash component riders: Some insurance policies, like whole life, have a cash component – one part of your premium goes towards life insurance and another part towards accumulating cash value via investments. Like all investments, the value of the cash portfolio can fluctuate and decrease. Those policies are typically more expensive than standard term insurance policies.
26. Renewal option: Search for a new life insurance policy before automatically renewing an old one, otherwise it could renew with higher insurance premiums. Typically, you want to start looking for a new policy several months before your existing policy expires. If you are in good health, however, it is practical to reapply at the renewal time for a Term 10 or Term 20 policy as term insurance is the cheapest insurance option on the market.
27. Medical tests / guaranteed policy: Thinking of skipping the medical exam in favour of a guaranteed issue policy? If you are in good health, this is a mistake. Guaranteed issue is a “last resort” for people with serious health problems and the policy can be quite expensive. If you are healthy, get the exam and enjoy lower life insurance premiums.
28. Multi-life discount: You can usually get two separate life insurance policies, one for each spouse. Some insurers will discount a policy if both spouses are buying from the same provider.
29. One policy for your spouse and one for you: You can get a single life insurance policy for you and your spouse, and it is often cheaper than two separate policies. One example is a Joint-First-to-Die policy, (also called JFTD).
30. Insurance company: Insurance rates may be different from insurer to insurer. You will need to do your homework and compare various insurance policies
31. Other riders: Do you need riders for your policy? They are extra, but important. Check the available riders to see which ones benefit you the most. Examples of common riders are: accident death benefit (higher payouts in case of death through an accident) and term conversion (in case you want convert your universal policy into term).
32. No to insurance agents: Know the difference between and agent and a broker. An agent provides products from one company. A broker can provide products from several companies. A broker gives you more options and can get you the best rates.
We hope that this comprehensive list of life insurance savings will provide a few ideas on how to reduce your life insurance rates and, maybe, invest the saved amount into larger coverage or other investments for your family. Should you have questions about life insurance or about your particular situation, insurance brokers with decades of experience are ready to provide you with a fair assessment and independent advice. Simply complete the form above to get an instant life insurance quote (those without existing preconditions will see the premiums immediately) or share a few details about yourself so an insurance expert can provide you with advice or a quote.