Life insurance is a vital financial tool that provides security to your loved ones in the event of your passing. Having it gives you peace of mind if you are the primary earning member of the family. Not surprisingly, statistics show that more than 52% of Americans have life insurance despite the financial commitment it entails. However, there’s still a long way to go because half of the families lack coverage.
In some cases, you may not qualify for life insurance despite having the right intentions. Not everyone may be eligible because providers assess several factors to determine an individual’s eligibility and the premiums they will pay. Knowing the facts regarding these criteria can help you assess your eligibility and make informed decisions when buying a policy.
In this article, we will explain the factors you must consider for determining your eligibility for life insurance.
Consider Your Age
Age is a significant factor when it comes to determining eligibility and premium rates for life insurance. Investopedia states that the premium amount increases by about 8% to 10% for every year added to your age. Someone in their forties may pay a rate as low as 5%, while the annual premium jumps over 12% for individuals over fifty. Individuals in their twenties and thirties get even better rates because they tend to have a longer life expectancy.
If you opt for term life insurance, your premium is decided at the time of buying the policy and remains the same later. However, with some policies, it may increase every year. You may even miss out on qualifying for insurance when an age-related condition affects your medical status. Insurers prefer to avoid aging policyholders because they are likely to fall ill or die while under coverage.
Assess Your Health Status
Your eligibility for life insurance is also dependent on your current health situation. Insurance companies evaluate an individual’s general health, taking into account their lifestyle choices, medical history, and any pre-existing disorders. If you have serious health problems or chronic illnesses, they may see you as a higher risk. It translates into increased premium rates or possibly denial of coverage.
Most insurance policies mandate applicants to undergo a medical exam as an integral part of the underwriting process, so you should learn more about it before going ahead. Expect a healthcare professional to evaluate your overall health, including vital metrics such as body mass index (BMI), blood pressure, and cholesterol levels. The results of this exam may affect your eligibility status and premium cost.
According to 1891 Financial Life, your family’s medical history may also be a point of interest for the insurer. It determines the probability of hereditary conditions. Additionally, smoking and substance abuse can impact your eligibility. Smokers and substance users are at risk of being denied coverage or higher premiums because of potential complications.
Pay Attention to Your Occupation
Did you know that your occupation can influence your eligibility for life insurance coverage? The higher the risk of injury or death at your workplace, the higher your premium will likely be. According to the Bureau of Labor Statistics, 5,486 fatal work injuries were recorded in the US in 2022, a 5.7% increase from 2021. The number shows the probability of severe injury or death during your employment.
People working as firefighters, pilots, or deep-sea divers may end up paying higher premiums because of the nature of their jobs. Engaging in high-risk hobbies such as racing, skydiving, or mountain climbing, may also impact your life insurance eligibility and premiums. Your driving history is another factor insurers may consider, specifically if it shows a pattern of reckless driving.
Evaluate Your Financial History
Surprisingly, when evaluating your eligibility for coverage, insurance firms could also take your financial history into account. They can consider several variables while assessing your risk profile. These include:
- Income level
- Credit score
- Financial stability
A stable credit history often makes an applicant more appealing to insurance companies. A steady financial footing can potentially result in a reduction in premiums.
Check the Policy Type and Coverage Amount
Qualifying conditions may vary for different kinds of life insurance policies. For instance, term life insurance usually has less stringent qualifying requirements compared to permanent life insurance policies like whole life policy. That’s because it provides coverage for a limited period. The policy you choose can define the eligibility criteria.
Similarly, your application’s coverage amount may influence your eligibility for life insurance. Usually, insurance companies assess if the level of coverage you want matches your risk tolerance and financial requirements. They may get suspicious of applications for unduly large coverage amounts compared to income or debts.
In conclusion, the eligibility of an applicant for life insurance depends on multiple factors. After all, providers need a convincing reason to provide coverage to clients. They prefer individuals with a low-risk profile. Even if they agree to cover someone with a higher level of risk, they charge a higher premium rate from such individuals. As an applicant, you must understand these factors to know your options and choose a plan wisely.