In setting premiums, life insurance companies calculate a base rate per thousand and then add a policy fee. If you have a rider on your policy, such as child or spousal insurance, there's an additional cost for that as well as a rider fee. Determining the cost per thousand of the insurance itself is a straightforward calculation: Subtract the cost of the riders and fees and divide your premium by the number of thousands of dollars of death benefit. As a policyholder, however, you might wonder how the company arrived at these rates. Several factors are involved, and taking a look at your lifestyle and demographic data can help you better understand how your rates are set.
Consider your gender—you'll pay more if you're a man. Men tend to die sooner than women do, so they pay higher rates.
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Find your age on the charts. Age is a big factor in the calculation of life insurance premiums. If you're young, you'll pay far less for the same coverage than an older person will. Ten years makes a big difference when it comes to the price of your premium.
Weigh yourself and measure your height. If your weight and height are proportionate, you'll get better rates than a person who is too heavy for his height. If you're too thin, however, that's also a red flag for additional premiums.
List all the bad habits you have that are linked to illness and premature death, and you'll find the items that insurance companies use to increase the cost of premium per thousand dollars of life insurance. Tobacco use and excessive use of alcohol increases your risk for fatal disease, and you'll pay more per thousand for the insurance. Even reckless driving and a high volume of speeding tickets can increase the cost, as can a criminal record.
Understand that any serious illness you've experience is in the medical bureau records available to insurance companies. Medical conditions of a serious nature cause insurance rates to increase. Even treatment for depression increases your premiums per thousand. Some conditions make you ineligible for life insurance. The amount of time that has passed since the illness, as well as your degree of recovery, can make a big difference.
Each company looks at the factors slightly differently. Something that causes one company to increase premiums may not be a problem at another, so check with several companies.