How Do Life Insurance Companies Evaluate Your Life Insurance?

Life insurance premiums differ from company to company. It is therefore recommended that individuals start looking around for life insurance online to get a quote. However, do keep in mind that many a time, insurance premiums quoted online are to some extent different from the actual premiums charged.

This difference between the quote and the actual premiums can be accredited to the way the insurance premium is calculated. Life insurance companies keep changing guidelines and selection criteria in an effort to stay competitive in the market. This is also followed in order to ensure that their risk management practices are in good order.

How is the Risk Class Evaluated?

The risk class of a policy buyer is determined by a countersigning process wherein a life insurance company decides whether or not to issue the policy to the buyer. The mortality can be determined by the life insurance companies based on several factors such as age, sex, medical history, habits, and profession etc.

It is up to the life insurance company to decide whether to issue the life insurance policy or not, depending on the information supplied in the application form. The process is further evaluated based on the medical examination report provided. It is important that the policy buyer stays truthful whilst filling in the form. This could help the life insurance company in being fair in its assessment of the risks involved.

Every customer who applies for insurance has to go through the evaluation and underwriting process. This process involves investigation into inherited diseases, analysis of medical history via medical reports and motor vehicle reports. Once the information is collected and analyzed, they are usually analyzed by a statistician, hired by the insurance companies.

Let’s check out some basic parameters insurance companies in India consider while issuing online life insurance policies to its buyers.

·         Income – It is important that you qualify financially for the amount of term life insurance you want. Insurance companies could also consider factors like outstanding debt, credit history, payment history, loans, and monthly account balance to determine your monthly premium.

·         Medical History – Insurance companies evaluate your past and present medical conditions, such as diabetes, blood pressure, or familial diseases such can cancer or heart problems. Hypertension is a common cause for higher premiums. Your medical history plays a big role in determining your policy cost. Life insurance companies usually provide a clean chit to buyers with the lowest possible risk of filing a claim.

·         Cholesterol – Your cholesterol needs to be under control. High levels or Cholesterol-to-HDL ratios could mean heavy premiums.

·         Tobacco Use - Tobacco and nicotine users have to pay almost 4 times more on an average for their policy.

·         Family History - It may not seem fair but the presence of cancer or heart problems in familiar history could affect your policy issuance and premiums.

·         Travel & Adventure Activities – For individuals whose profession involves lot of travelling, or activities like scuba diving, rock climbing, or car racing, the insurance could cost a little more. Travelling to different countries is considered dangerous and could result in higher premiums. There are chances that your application could get rejected in certain cases.

It is, therefore, important that policy buyers do their homework on understanding life insurance products before they opt for any policy. This will not only help them in making sensible decisions, but also help them build a better and secure financial future.