In this article, we will explore the various factors that affect your life cover, disability, and critical illness premiums. By being aware of these factors and their impact, you can save money, reduce risk, and gain peace of mind knowing you have the right coverage at the right price.
What You Need to Know
Life cover, disability and critical illness premiums are all based on your assessed levels of risk. Some of these factors that affect our premiums we cannot change like our age, while other factors like smoking status we can change.
Being aware of the influence we have over our premiums could be the difference between a lifetime of savings versus overpaying.
By highlighting and explaining these factors we hope that you will be able to save money and reduce your risk. Knowing that you are paying what you should for cover that you need is a great feeling.
(Just in case you are not sure what an insurance premium is, Investopedia has a brief explanation over here.)
The most common Risk Factors that affect your insurance premiums are:
- Age
- Gender
- Occupation and income
- Qualification
- Health and Medical History
- Smoking status
- Lifestyle
Changes to any of these factors may have an impact on your existing policy. You need to let us know of changes in your life as it could lead to changes to your premium or worse your claim being rejected.
How does AGE impact your insurance premium?
Probably the most logical risk factor when determining risk is your age. The younger you are the longer the less likely you are to claim.
While we can’t control our age, we do have control over when we start investing in insurance products. Insurance isn’t an investment in the traditional sense, but starting early can still be advantageous. For instance, getting life cover at 45 is much more affordable than waiting until you’re 55. So, it’s worth considering the benefits of starting your coverage sooner rather than later.
Do not be afraid to review your products or ask us for a second opinion. We are doing it all the time.
How does GENDER impact your insurance premiums?
Gender plays a role in the insurance premium. Insurance providers use approximate risk models based on research that shows women tend to live longer and make safer decisions. As a result, women often pay less for coverage compared to men.
How does OCCUPATION and INCOME impact your insurance premium?
Your occupation and income give insight into your daily activities which has a significant impact on your risk rating. An electrician who is on their feet all day, climbing ladders, working with power tools and live wires, is at a much higher risk of injury and death when compared to a web designer.
Occupation is a complex risk factor insurers need to assess. You could be an electrician in a company where you do most of your work at a desk or workbench or you could be on ladders working with high voltage wires all day. These need to be evaluated differently. Your occupation and the occupation split is crucial to being rated correctly along with making sure your claim is paid. A financial planner should ask for more detail to determine your occupation risk.
How do QUALIFICATIONS impact your insurance premium?
There is data that shows a general link between the level of education and the decisions people tend to make. Statistically, individuals with tertiary education are considered less risky. It is worth mentioning here that your qualification, occupation and your income share a connection in risk ratings.
You can still have an excellent risk rating without a qualification. If are desk-bound as a manager, earning a good salary, insurers will not factor in that you don’t have a degree. Similarly, you could be a doctor working as a research volunteer without earnings and still be on the top risk rate because of your qualification.
How does HEALTH impact your insurance premiums?
This is a unique risk factor when compared to others as insurers may impose exclusions and loadings based on their findings.
As part of applying for risk cover, you will be asked several questions and you will likely be required to complete a medical exam. The health questions include family history questions which insurers use to screen potential risks.
The health exam includes assessing your height, weight, blood pressure and taking blood. From the blood test, they will look at cholesterol, smoking, liver and several other screen tests.
Some providers claim to do less medical underwriting than others but always read the fine print.
How does SMOKING STATUS impact your insurance premiums?
A somewhat obvious factor that affects your premium. Smoking has been shown to lead to various health issues and a smoker’s insurance premium will be higher than a non-smoker. However, if you quit smoking, you can inform your insurer and potentially receive a significant reduction in your premium.
IMPORTANT! If you start smoking you need to check the fine print of your policy as you may be required to notify your insurer. Failure to do so may result in your claim one day being rejected.
How does LIFESTYLE impact your premiums?
Are you an adventure seeker? Do your hobbies take your feet off the ground, head underwater or going faster than most humans can run?
If you enjoy activities like diving, flying, biking, hunting it is important to mention this when applying for cover as this may impact your insurance premium. There is a chance your premium is going to be higher than that of less risky individuals.
In Summary
Insurers are trying to understand who you are and they are trying to price the risk they are taking on. When taking out new cover it is really important to speak with someone independent and objective to insure that you are insured correctly. We are independent and objective.
If you have exisitng policies we cannot stress enough how important it is to keep reviewing your products, plans and speaking with a financial planner.
Live Trust Grow Matter
The information provided in this article is for informational purposes only and does not address individual circumstances. For personalised financial advice please contact us info@growmatter.co.za
