Life Insurance Premium

By Richard Reich

If you are applying for a life insurance policy, it is important to understand how the insurance company will decide how much premium (the price) you will pay for the policy. When you receive a life insurance quote online or from a local agent, you should know that a quote is really a "best guess" of the broker/agent you are working with. However, if your original quote takes into account your age, sex, tobacco use and health and lifestyle factors, chances are the quote will be more accurate. When the application goes through the underwriting process, the insurance company determines the premium you will pay.

The process begins with your application, which will gather a thorough health history, including current medical conditions and medications you are presently taking. Any significant family medical history will be collected on the application as well. There will also be lifestyle questions which will ask about your driving record and any dangerous activities you might be involved in at work or as a hobby (flying, scuba diving, rock climbing, etc.).

A medical exam is typically required for the application. A licensed nurse or other professional will visit you at home or work and take blood pressure readings, will weigh you and measure your height, take blood and urine samples and ask more medical questions (some of which might be duplicates of those asked on the application). For some applicants, depending on age and the amount of death benefit applied for, other tests might be required (e.g. EKG). These exams are paid for by the insurance company you are applying with and usually must be performed by examiners contracted with them.

Your application and medical exam and lab results are then submitted to the insurance company for review by an underwriter. The underwriter might request medical records from your physician (whose information you submitted on the application) and might also request an MIB report. The MIB Group is a membership corporation owned by member life insurance companies in the U.S. and Canada. They maintain a database for members to exchange confidential information of underwriting significance when an individual applies for life, health disability income, long-term care or critical illness insurance.

The underwriter will review all your information and, based on your age and sex, tobacco use and medical history (including current medical conditions) will assign you to a risk class, also known as health class - usually Preferred Plus, Preferred, Standard Plus, Standard and several sub-standard classes.

The underwriter can then determine your premium by plotting your age, sex and heath class against the insurance company's rate card, which must be filed with the Insurance Department in every state they sell insurance in.

Now that you understand how insurance companies determine your life insurance premiums, you will know how to evaluate life insurance quotes you receive. Make sure they are based on as much health information as possible. Minimally, they should factor in your age, height and weight, tobacco use, driving history, blood pressure, cholesterol and family history.

Richard Reich, President of Intramark Insurance Services, Inc. in Pasadena, California is licensed to sell life and disability insurance in 50 states and the District of Columbia. On http://www.lifeinsure.com, one can learn about various types of life insurance, and get multiple quotes without having to enter personal contact information.

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