Have you ever sat down and wondered, how are insurance quotes calculated? Perhaps you had a discussion with a friend and discovered that their life insurance quote is lower than yours even though their policy covers the exact same thing yours does. You’re confused. Are there certain aspects in your life that resulted in such high insurance quotes?
Knowing what goes into the cost of life insurance is valuable information. This little bit of knowledge could help you understand how life insurance quotes work and give you insight into some factors that could save you more money down the line.
The cost of your life insurance quote depends on five factors – your policy, your health, your age, your gender, and your lifestyle.
Your policy consists of the type of insurance plan you’re taking, the coverage, and the term length.
In Malaysia, there are five types of life insurance plan available. The first one are term plans. Term plans provides coverage for a set length of time (20 to 30 years). They are the least expensive because they do not give any sort of return. That means, the cost you’re paying is to solely cover the insurance charges.
The next life insurance is endowment. Endowment plans are mainly for savings purpose with a small portion of life insurance. In terms of cost, they are expensive because they provide both investment returns and protection coverage. They also have a shorter coverage period of 10 to 20 years.
The third type of life insurance are whole life plans. Whole life plan combines both the term plans and endowment plans. Policyholder pays into the plan monthly, and this money goes into two places: insurance and low-risk investments. Whole life plans are designed with a balance portion of savings and coverage, covering up the policyholder’s whole lifetime.
Next are investment-linked plans. They are a mix of life insurance and investment plan which means you’re protected under insurance coverage while also allocating your money for investments. The premiums you pay will cover the insurance protection and the investment funds of your choice.
And last but not least, Takaful insurance. Takaful insurance are based on syariah laws. Both the policyholder and the policymakers will agree to guarantee each other and make contributions to a pool or mutual fund instead of paying premiums. in terms of cost, Takaful fund rates are generally fixed.
Each of these insurance plans have their own purposes and features that affect your insurance quote!
Insurance companies rely on statistics to examine the frequency of health issues arising among their insureds based on a number of factors and determine qualification for insurance based on those factors.
So, your physical health is a big risk factor. Existing health problems like high blood pressure, HIV, or chronic illnesses may increase the cost. In addition, certain lifestyle habits like smoking may add up to your insurance quote. For instance, nicotine users can pay two to three times more than the average person.
They can also take a look at your family history. When applying for an insurance policy, insurance companies will investigate your family’s medical history to calculate potential risks. If a family member has died from a cardiovascular related illness, or from chronic illness such as cancer, then expect a high insurance quote.
Insurance quotes are always cheaper for younger individuals because younger individuals are less likely to suffer from risks the same way older individuals are. Older individuals are more prone to have health issues and will most likely need to see a doctor. However, younger individuals have a higher chance of getting into accidents or have serious injuries.
Recent studies indicate that women outlive men by five years and develop health issue much later, usually by the time they’re in their 70’s or 80’s. Men, on the other hand, start developing them in their 50’s or 60’s. The shorter life expectancy may be a huge factor to higher insurance quotes.
However, women will go through child bearing stages in their lives which can plague them with a number of complications, hence high quotes can be charged. Plus, women are also more likely to have regular check-ups than men.
The riskier your lifestyle, the higher your life insurance quote.
How do you identify a risky lifestyle? For one, professions. Certain professions are inevitably risky such as offshore workers or firefighters. They have a higher chance of getting injured on the job.
Another example are hobbies. If you’ve decided to pick up dangerous hobbies like racing cars or flying helicopters, you life insurance will need to cover that type of risk. Hence, higher quotes. Other lifestyle factors are based on your smoking habit or drinking habit, as well. Insurance companies can also take a look at the way you drive!
Your choice of policy, physical health, gender, age, and lifestyle are classic factors on how insurance companies can charge you. But as the world progresses, so does the insurance industry. In today’s revolutionized world, insurance companies depend on Internet of Things (IoT) to assess your potential risks.
Using data collected from connected devices, insurance companies are now able to obtain more accurate personal information which can help customize plans that will best suit their clients’ needs. This way, the policies recommended are more personalized and thus creates a more accurate estimations to cover potential risks. IoT is also beneficial in detecting potential frauds.
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