When getting an insurance plan, the foremost question on most people’s minds is the price.

Prospective policyholders are always on the lookout for gaining the best value for money – or at least not paying more than what is the standard. Yet, it is no secret that premium rates are never the same, even for the same insurance plan. It varies from person to person depending on a wide range of factors.

Just as individuals are concerned about getting the total value of the benefits under their insurance plan, insurance providers are constantly reviewing ways to cut down on their risks. That is the only way they can remain in business.

There are therefore so many factors an insurance company uses in deciding whether to sell you a life or health insurance and the amount of the premium you’ll need to pay either monthly, quarterly, or annually. They range from age to location to health status and many other considerations.

However, the introduction of the Affordable Care Act – has largely cut down the number of factors that insurance providers can legally consider in selling a healthcare policy. So, in comparison with life insurance, the factors that currently affect health insurance are limited in number.

We will consider these factors briefly before discussing the ones affecting life insurance.

Health Insurance: What is generally considered.

  • Body Mass Index: Over the years, studies have consistently shown a significant correlation between high body mass index and certain diseases. People with more than average BMI are more likely to develop illnesses such as diabetes, as well as to suffer cardiac arrests and other heart problems. Therefore, they would be made to pay more on premiums than those with average body mass.
  • Age: As you grow older, you will discover a rise in your premiums. It might not seem fair but it is a well-known fact that people have a higher chance of getting a chronic illness in their older years (40-60) than in teenage years or early 30s.
  • Location: The nature of your premiums is also largely determined by the rules of your municipality or state. Just as someone who lives in Brooklyn or Boston will likely pay more rent than someone living in New Jersey, so does your location affect the price of your health insurance premiums.
  • Number: A health insurance plan that covers a family is more expensive than an individual plan. However, it is cheaper to purchase one healthcare policy for the entire family than have each family members buy theirs separately. The difference will boil down to many different considerations which you should definitely clarify before signing up for either one.
  • Type of plans. There are different types of health insurance plans. There is silver, bronze, gold, and platinum. All of which come with different price arrangements for the policyholder. For instance, the bronze plan features the lowest rates on premiums while the policyholder pays more in out-of-pocket expenses. Whereas, the platinum plan has the highest premiums with reduced out-of-pocket expenses.
  • Tobacco use: Smokers will find that they have to pay a significantly higher amount as premiums than non-smokers. However, this can often be reversed if the policyholder abstains from smoking for a period of 12 months, depending on the specifics of the situation.

Factors Affecting Life Insurance.

With life insurance, the factors that will be considered by insurance providers are a bit wider. Some of them are.

  • Age: Just as in health insurance, age is the single largest determiner of life insurance premiums. As people get older, the cost of their life insurance premiums is bound to rise.
  • Gender: The average lifespan of a man is at least 5 times less than that of a woman. In the U.S, it is 80 years for a male and 85 years for a female. Insurance companies have taken note of this and so require men to pay slightly more premiums than women. Another reason for this discrepancy is that men usually engage in more dangerous occupations and activities than women.
  • Smoking/Tobacco consumption: It’s public knowledge that smokers are liable to die early. In the past, this was debatable but health experts have reached a consensus. Therefore, anyone consuming tobacco through smoking or any other means will pay higher premiums than other people.
  • Health Status: Before you get a healthcare plan, you will be required to provide information on your health. The insurance provider will want to know if you have any underlying illnesses or chronic health issues. They may also ask you to carry out tests and submit blood samples. If they discover any illnesses, you will be asked to pay more on premiums.
  • Lifestyle: Your lifestyle could also push the numbers you pay as premiums up. Do you frequently go scuba diving, mountain climbing, or hunting? These activities which are attached to risks of varying degrees will cost you extra on the dollar.
  • Occupation: Arguably there is dignity in all types of jobs. Yet, the risks associated with each job greatly vary. For a white-collar worker, the risk of serious injury or death while on the job is significantly different from that of a truck driver, miner, pilot, fisherman, and logging worker.
  • Health History of Family Members: If your family has a history of certain illnesses, it might just jack up what you’ll pay as premiums. For example, if your mother and sister had previously been diagnosed with cancer or if your close relatives have a history of heart problems.
  • Driving Records/Habits: Insurance providers are no fans of fast and furious Having lots of speeding tickets and a recent record of causing collisions will increase premium costs because driving accidents cause a large number of deaths and people who drive recklessly are at increased risk. Worse still, a report of driving under influence (of alcohol or any other drugs) can prevent you from getting a life insurance plan altogether.
  • Payment Schedules. The less frequently you pay premiums, the cheaper it will be. A lot of people are oblivious to the fact that monthly payment of premiums is not the only option. Typically insurance companies accept payments month.y, quarterly, bi-annually, or even yearly. Paying premiums less frequently is the same as buying groceries in bulk. You get the same thing for a lower price.
  • Amount of death benefit – This is the policy itself. When signing up for the policy, the amount of money you stipulate as the death benefit to be disbursed to your designated beneficiaries will be a major factor in the determination of how much you’ll need to pay as premiums.