How to Calculate a Life Insurance Premium
Insurance companies pay out when the insured dies, so they base their premiums on the statistical probability of that person's death. The companies consider certain factors that make a difference in the life expectancy of the insured: For example, statistically, men die at a younger age than women, so they pay a higher rate than women. If you find the company requires you pay a higher premium, they aren't picking on you but simply using statistical factors to calculate the rate.
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Instructions
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Check the amount of insurance necessary. Companies use rate per thousand to base life insurance premiums. Smaller amounts normally cost more per thousand than larger amounts. For example, the price might decrease once the insurance amount goes over $100,000. It normally costs about the same amount for the company to underwrite $100,000 as it does for $10,000. The price break reflects the difference.
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Consider your weight-height ratio. If your weight is perfect for someone two feet taller than you, you'll pay more in premiums. Statistics show that additional weight creates a higher potential for life-threatening conditions. The more weight beyond the ideal, the more you'll pay for premiums. Underweight people also pay more.
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Keep a check on your bad habits. Smoke cigarettes, abuse drugs, or drink in excess and you'll find that your premiums will jump.
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Increase the rate if you recently had or still have an illness that could cause death. Cancer, diabetes, coronaries and other diseases are reasons why insurance companies may decline the individual or increase the premium rate. People who had a disease in the past but recovered may still pay higher rates that may decrease the longer they're symptom-free.
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Accept that you'll pay higher rates if you have a dangerous avocation or occupation. An avocation like racecar driving increases your rate. In fact, someone with too many speeding tickets may face an increased life insurance rate.
Dangerous occupations also increase the rate. Sometimes life insurance companies add a flat rate or lump sum; other times they increase the rate per thousand dollars of coverage. Once you cease the activity or job, the company reconsiders the additional sum and may lower the rate.
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Add in any riders and a policy fee on top of the premium. Additional types of insurance such as family coverage or waiver of premium add to the cost of the policy. The insurance companies then add a policy fee on top of the total premium. The policy fee is constant regardless of the amount of insurance you purchase, which is another reason that lower amounts of insurance pay a higher price per thousand dollars of coverage.
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Tips & Warnings
If you have extra muscle mass that may cause an excessive weight rating, take a snapshot that shows your muscular build and get a doctor's statement to show it's not body fat but muscle. Companies often reconsider the rating.
