Life insurance premiums are based chiefly on statistical tables called mortality tables. These tables state the probability of dying at a given age during a period of one year. Insurance companies also base premiums on the interest they expect to earn from investments made with the premiums and on the cost of doing business.
The amount of the premiums may also be affected by a person's insurability-that is, the risk the insurance company takes in providing coverage for that person. A person who has high blood pressure, diabetes, or some other medical condition may be charged higher premiums. An individual whose work or leisure activities are considered dangerous may also pay higher premiums. The majority of insurance companies charge substantially higher premiums to smokers, and many companies charge lower rates to nondrinkers and people who exercise regularly.
How Premiums are Figured
Category: Life Insurance