Some people have been wanting to know what determines the cost of life insurance premiums, so I thought I'd take a few minutes and write an article about it. Basically, it all comes down to statistics. Not just any statistics, but the specifics of mortality rates for individuals of different age groups, men and women, in order to determine how much your premium payments are each month. It's really not all that complicated, but I'll give you a couple of examples.
Do you know how many legal forms have questions that ask you how old you are by checking one of the different age brackets? You know what I mean, you're between the ages of 20-25, 26-30, 31-35, ect. Well, insurance is figured similarly to age brackets just like this. The insurance companies look at how many males (example) died in a particular age group, over a certain period of time. This could be five, ten or more years. Normally, you'll begin to see a consistant pattern over a certain time frame and this gives the insurance companies a basis to go on.
Example, let's say that we have a male that's fifty years old, he's a non-smoker and he wants to buy a life insurance policy on himself. Well, the first thing that this gentleman will have to do is to get a complete physical. The insurance company wants to know EVERYthing, including blood work. After the doctor has all of the test results back, if the man passes his physical, then the life insurance company will offer to sell him a policy. This policy will be based on the average mortality rate of fifty year old males that are non-smokers and generally in decent physical condition. The insurance company has a chart that has already figured out exactly how much they need to charge him for his policy, based on the statistics of men like himself.
Let's say that over a ten year period, twenty, fifty year old men out of one thousand die annually. This could be from any cause. Well, the insurance company looks at those statistics and determines that they have to charge a certain amount of money in order to pay twenty two beneficiaries their money, pay all of their operating costs and still make a profit. After they crunch those numbers then you know how much you need to pay. It's only natural that a smoker of the same age is going to have to pay more than the non-smoker. It's also a given that someone infected with HIV will not be insurable. Much of this is just based on common sense and statistics, and the statistics don't lie. Hope this helps.
Joe Stewart is a Webmaster and former Life And Health Insurance Agent. He's made understanding life insurance simple for consumers. You can read detailed explanations about life insurance at his website TheLifeInsuranceGuys.com or by clicking on Instant Online Life Insurance Quotes