How Your Life Insurance Rate Is Calculated

When thinking about life insurance, it’s common to wonder how companies determine your rates.

What Influences Life Insurance Rates?

Life insurance providers rely on their underwriting teams to assess factors like your medical history, current health, tobacco use, family medical background, and even driving records. These details help them evaluate how much of a risk you present.

Actuaries then use this information to estimate how likely it is that the insured person will pass away during the policy term.

That’s why a healthy 25-year-old typically pays much less for term life insurance than a 25-year-old who smokes, has diabetes, and multiple traffic violations. The second individual presents a higher risk, so the insurance company charges a higher premium to account for the greater likelihood of an earlier claim.

Reasons for Higher Premiums

Insurance companies often raise premiums to reduce risk or balance potential claims. Several factors can cause premiums to increase.

1. Health Risks

Smoking or heavy alcohol use increases your risk level, which results in higher premiums. A personal or family history of cancer or heart disease can also impact your rate.

Other chronic health issues—such as high cholesterol, obesity, depression, or high blood pressure—can raise your cost. In some cases, having multiple health conditions might even lead to an application being denied.

However, life insurance is still possible for people with serious medical conditions. If one insurer declines your application, another might accept it. That’s why shopping around is important.

Even if someone is approved at a higher rate due to an illness like heart disease or cancer, they can request a new medical exam later. If their health improves, the premium may be lowered.

Many agents work with impaired-risk specialists who know which insurers are more likely to approve high-risk applicants.

2. Lifestyle Risks

Certain hobbies that carry a high risk of death—like race car driving, skydiving, ultra-marathon running, snowboarding, wakeboarding, or mountain biking—can lead to higher premiums.

Some professional or extreme activities automatically place a person in the high-risk category. These include deep-sea diving (over 100 feet), hot air ballooning, private aviation, mountaineering, bungee jumping, wingsuit flying, heli-skiing, and big-wave surfing.

Regardless of your situation, it’s essential to be truthful on your application. Insurance companies have tools to detect fraud. If you lie, your policy could be canceled or a future claim denied.