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8 factors life insurers use to assess your risk

By Martin Hesse Time of article published May 13, 2021

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A life insurance company first needs to know the risk it is taking on before it will agree to insure you for death or disability. This is known as underwriting. If you present a high risk to the company, you will pay a higher premium than if you present a low risk, because the probability of claiming is higher. Insurers look at several factors when assessing your risk, through a list of questions in the application form, which you need to answer fully and truthfully. The most common factors are the following.

1. Age

The older you are, the higher the chance of you falling ill or dying. Someone taking out a life policy in their twenties will pay a far lower premium than someone doing so in their sixties.

2. Gender

Women tend to live longer than men – by seven years, on average. Therefore a woman will pay a lower premium than a man for the same amount of cover, all other things being equal.

3. Health

Your medical history as well as your family history of any inheritable diseases are essential for your underwriting. If you omit something serious, such as having diabetes, a claim is likely to be rejected.

4. Occupation

Some occupations are more dangerous than others. If you work outside – on construction projects, for example – or on a factory floor, you present a higher risk than if you work in an office.

5. Leisure activities

You may get a thrill out of skydiving or rock climbing, but your insurance company will not share in your delight. Such risky activities are fine when you are young and single, but perhaps you need to reconsider them when you start a family.

6. Education level

People with a higher level of formal education tend to be healthier and live longer than those with less education. This factor goes hand-in-hand with the following one, your income level.

7. Income level

Statistics show that higher-income earners are healthier and live longer than people living on a lower income. They can afford better health care, tend to eat more healthily, and generally live a healthier lifestyle.

8. Smoker status

The dangers of smoking are by now well known. Being a non-smoker makes a huge difference to your premium: you could pay half of what a smoker pays for the same amount of cover, all else equal.

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