What Is The Connection Between Risk And Life Insurance?
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Asked October 3, 2011
Insurance companies use the risk of a person passing away to help determine the premiums on any given policy. Factors that must be considered include the person's age, where they live and their personal health information. As the risk increases, so do the premiums the insurance company will charge. The connection between risk and life insurance has been assessed in a similar fashion for more than three centuries.
It is fairly obvious that a person who is in their seventies is a higher life insurance risk than a man in his twenties. A couple of decades ago, and elderly person trying to purchase a life insurance policy might have difficulty finding a company who would write the policy, but the average life expectancy has increased from the mid-70's to over 80 with the help of modern science, and life insurance today is available for older people at affordable prices. But it is important to keep in mind that your age is only one of several important factors.
Where you live plays a part in how long you can be expected to live. Some areas, such as South Florida or Arizona, are well known climates for aging people, and the life expectancy of a person living in Florida is much higher than the same person living in a place such as New York. Additionally, some areas have higher individual crime rates, and insurance companies have to adjust the premiums to account for a greater chance of mortality related to crime or violence.
Your occupation is also a major factor. Those who have spent their working lives in an office environment have not faced the same risks as someone working in a factory or chemical processing plant. For the insurance company, it can be very important to determine what risks you have to deal with on a daily basis, and high risk occupations result in higher policy premiums.
Your personal health is also a vital piece of the puzzle. If you suffer from asthma or a heart condition, your premiums are going to reflect the additional risk faced by insurance companies. This is why the insurance company wants to know about your medical history, whether or not you smoke or drink, and other information about your personal lifestyle.
Answered October 3, 2011 by Anonymous