Life insurance pays out on death. So, the more likely you are to die, the higher the risk – and the more expensive the policy.
Insurance companies ask a lot of detailed questions when you apply for life cover to try to determine what level of risk there is of you dying during the ‘term’ of the policy, and how much to charge you as a result.
Your age is one of the most important factors because older people are statistically more likely to trigger a life insurance claim than younger people – in other words, an older person’s life expectancy is shorter. A 50-year-old can therefore expect to fall into a higher risk category, and pay a higher premium, than a 20-year-old.
State of health
Your state of health can also put you into a high-risk insurance category. Let’s say you already suffer from a medical condition such as cancer. The insurer would immediately judge you to be high risk and would probably exclude the condition from your policy. In other words, if you were to die as a result of the cancer, the policy would not pay out. Your family would, however, be able to claim if you were to die from another cause.
If you try to conceal any relevant information, you could invalidate the policy
With a less serious condition, such as high blood pressure, the condition might not be excluded, but the premium would be higher than otherwise to reflect the risks.
Insurers want to know about your lifestyle, too. So watch out if you are overweight, a heavy drinker or a smoker as you will probably pay more for life insurance than a non-smoking gym enthusiast who never touches a drop of alcohol.
And don’t think you can get away with it if you smoke e-cigarettes. They might not contain any tobacco, but the lack of objective medical evidence of the long-term health benefits of e-cigarettes makes it difficult for insurers to assess the risks. People who smoke e-cigarettes are therefore classed as smokers by the insurance industry.
If you use e-cigarettes, you’ll also test positive for nicotine – which means the insurer won’t know if you’re actually smoking tobacco or not. And to be on the safe side (from their point of view), they’ll assume you are.
To find out more about smoking and life insurance, read our comprehensive guide.
You might not think your address or occupation would be important, but your insurer certainly does. Statistics suggest some postcodes are riskier than others because the inhabitants are generally unhealthier.
Your job can also have an impact on your lifespan, with professions such as oil workers, police officers, fire officers and members of the armed forces seen as particularly high risks.
Sports and hobbies
Then there are high-risk sports and hobbies. A stamp collector is statistically likely to live longer than someone who enjoys white water rafting, so the insurer will take into account your pastimes, plus your level of competence.
You don’t always need to undergo a medical examination when you apply for life insurance, though your insurer might ask for permission to contact your GP. But it’s always important to give full and honest answers to any questions. If you try to conceal any relevant information, you could invalidate the policy. It would then not pay out in the event of a claim.
Terms and conditions
Make sure you understand the terms and conditions of your life insurance, paying particular attention to any exclusions – these are the situations when the policy will not pay out following your death.
Cutting the cost
You can help to cut the cost of life insurance by cutting the risks. You could, for example, aim to lose weight by eating more healthily or taking more exercise. Your premiums will also drop if you stop smoking nicotine products, though you will normally have to wait 12 months to be classed as a non-smoker.
If you do manage to stop, or if you succeed in losing a lot of excess weight, be sure to let your insurer or broker know!
Premiums vary from insurer to insurer so it’s a good idea to shop around for life cover. MoneysuperMarket’s independent site is one of the easiest ways to compare premiums, helping you to find the best policy at the best price. But don’t cancel an old policy until you are sure the new one is in place, or you could be left without cover if any difficulties arise.
Some mainstream insurers might refuse to cover a high-risk customer. But don’t despair as you might well be able to arrange high risk life insurance through a specialist firm, though you should be prepared to pay a higher premium than someone considered to be a lower risk proposition.