Calculating your Rate

Calculating Your Term Life Insurance Rates

A lot goes into your term life insurance rate. First off, there is an entire branch of mathematical science dedicated to it. This is the sub field of actuarial science. People are paid good money to calculate as much of the risks as is humanly possible, and then factor it all together so that the insurance company can provide you with insurance and make a profit.

What Factors Do Actuaries Look At?

How it works is that you and your lifestyle are first split up into all kinds of different characteristics. For example, if you are a female, you have a slightly longer life expectancy and a slightly lower risk of death annually. This means your annual insurance premiums will be lower because the chances that you will have to collect in a given year will be lower. Although, if you live longer, you actually have to pay just as much for life insurance over time. Everything evens out eventually.

Other Risk Factors

Your sex is just one factor that influences just how much you’ll have to pay. If you smoke, you’ll end up having to pay more. Tobacco smoking causes tons of negative health effects, which will make it more likely that you will die in a given year. The insurance companies will charge you extra to cover the costs that they will have a slightly higher chance per annul of having to pay. If you haven’t kicked the nicotine habit, this is just one more reason why: it costs you more money!

How it Works

Basically, when your lifestyle and you are split up into a bunch of definable characteristics, each of these characteristics can then be graphed in terms of life expectancy. It is part of the scientific method: isolating variables in order to compare them to another measurable trend. In this case, that trend is the average length of life and the variables are anything that extends or lowers your average length of life. Once you grasp this general concept, you can see what will increase your insurance premiums: anything that increases your average chance of death or, put another way, lowers your chance of life

Even More Risky Variables

For instance, if you exercise, your life will on average be longer–and of better quality too! If you are a healthy weight, you have a much lower chance of being hit by all those unfortunate side effects of obesity. Engage in risky activities like extreme mountain biking and your premiums might rise. If you do many dangerous and illegal drugs like heroin, cocaine, or methamphetamine, you can bet your bottom dollar that you are going to be forking over more money each year for your life insurance premiums.

What Can You Do?

Be healthy, balanced, and take things in moderation. Basically, all that good old fashioned advice that your mom and dad used to tell you like “eat your veggies!” and “lights out and get a good night’s sleep” will help save you money on your life insurance premiums–and you’ll feel better too from doing it!


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