How is Life Insurance Premium Determined?
Why does your friend pay less than you? Insurance companies use complex algorithms that look like black boxes when determining a price. In this article, we open that box and examine 3 critical variables that determine your premium (Age, Health, Coverage).
1. Age Factor
This is the most brutal rule in insurance: When young, risk is low, premium is cheap. A 30-year-old pays almost half as much as a 40-year-old.
2. Health Status
Blood pressure, cholesterol, and family history... These data are examined in the 'Underwriting' process. A clean health history is your ticket to the 'Super Discounted' class.
3. Coverage Amount
The premium difference between $1 Million coverage and $100k coverage is not linear. Sometimes doubling the coverage only increases the premium by 20%.