Lifestyle Effects on the Cost of Life Insurance

Why do some Americans pay such high rates for life insurance, particularly when their friends, relatives or colleagues at work do not pay the same? If you’re stuck wondering, consult an insurer and ask to specifically compare the policy about which you’ve heard to your own. The reasons for the cost differential may become apparent when comparisons are made through the same policies.

Five key factors have the potential to affect insurance premiums: dog or large animal ownership; occupation and lifestyle; history of past insurance claims; credit score; and smoking habits. While some of these factors may seem surprising at first, they make sense when one understands the reasoning behind them.

Dog insurance claims cost millions of dollars every year. For example, California insurers paid out $480 million for dog bite claims in 2011 alone. Claims like these fall under the umbrella of renter’s or homeowner’s insurance, so if you want coverage, an insurer will want to know what breed of dog or other large animal you have. Some dogs may be excluded depending on their breeds, or a surcharge may be added if your dog has displayed dangerous behavior in the past. If your pet causes too many claims, your premiums may increase significantly, or your future insurance coverage may be declined.

Have a high-risk career as a construction worker, rodeo cowboy or diver? Your premiums for life insurance will be higher. Insurers will want to know if policyholders who travel outside the country participate in extreme sports like ballooning or skydiving. Some sports activities can also raise insurance rates, though policies differ at each insurance company. Always shop around for the best prices and coverage.

Some states have rules and regulations dictating that insurance companies can increase your premiums once you have filed any claim. By company logic, if you file once, you are likely to file again. All claims are on record. However, some insurance companies do have claim forgiveness.

Some insurance companies will check credit scores when calculating premiums for life, property or casualty insurance. Insurers claim that credit scores show how responsible you are; bad credit indicates that you may not be responsible. This practice is legal in some states. These checks are not permitted for health insurance premiums. Get several quotes from different insurers if you are concerned about your credit rating affecting your life insurance rates.

Even though the Affordable Care Act ensures that no one may be denied coverage or charged higher rates for pre-existing conditions, insurance companies may add up to a 50 percent surcharge for smokers. Some states allow the highest possible rate; others have smaller surcharges. If you want to reduce your premiums, enroll in a class to stop smoking. Life insurers rate smokers at a higher risk for life-altering medical conditions.

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