How are life insurance premiums set?


A person's state of health and their lifestyle are always taken into consideration.

Emmanuelle Bertrand | Journalist

When you're looking to take out life insurance, it's only natural to wonder how your eligibility and the premium you'll pay are determined. 

Patrick F. Bouchard, an advisor with Desjardins, sheds some light on the topic. 

A person's state of health and their lifestyle are always taken into consideration: "If you play an extreme sport, or you're a bush pilot, the insurance company is going to spend a little more time on your application," explains Bouchard.


Here are the factors insurance companies usually consider:

Factors

To determine insurability

To set the premium

State of health

Sometimes

Tobacco use

Lifestyle[1]

Sometimes

Driving record

Sometimes

-

Body mass index (weight vs. height)

Sometimes

-

Gender

-

Age

-

Amount of insurance

-



[1] I.e., alcohol and drug use, extreme sports, high-risk occupations


"The more insurance you're applying for, the more questions you'll be asked," he adds, "because the insurance company will want to know what risk you represent."  Bouchard says it's possible to make large-scale savings on the amount of insurance: "That's why the insurance premium on $100,000 may be only slightly less than the premium on $90,000." 

Another interesting fact: there are generally no fees to pay outside of the premium and taxes. 

Before you sign
Before taking out insurance, consider these 6 tips from our expert:

1. Don't put off purchasing life insurance.

2. Think about what you actually need:
    • What do you want to leave your heirs (children, spouse)?
    • Are you saving up for your children's education? Think about putting aside a certain amount in the event of your death.
    • What property and assets do you want to cover?
    • Do you want to insure an additional family member or a business associate?
    • Do you want to make a donation upon your death?
3. Deal only with an advisor you trust--they should be able to answer all your questions.

4. Don't shop around with only the price in mind; think about the product's features, too. There are lots of options out there, and some will be better suited to your specific needs.

5. Think about getting life insurance outside what you have with your employer. The insurance you get through work is meant to cover general needs and can be reduced by close to 90% after retirement age.

6. Be honest when you answer the insurer's questions--it's the best way to avoid headaches down the road!

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