Scaling mountains might be part of your active and healthy lifestyle, but a life insurance carrier will see your hobby very differently. When it comes to determining if you will qualify for life insurance, a life insurance carrier must assess risk. It can feel personal because they evaluate you, your medical history and your lifestyle, mountain climbing and all.
With life insurance policies, the risk is applied to the likelihood of your early death or death throughout the policy term, especially so with term life insurance policies. With whole life insurance policies, an insured person’s death is inevitable. That is why whole life insurance premiums cost more but remain at a set rate for life as long as the policy remains in force. So scaling those mountains might be worth it to you, but to a life insurance carrier, it’s risky business.
The process by which risk gets assessed to determine eligibility for life insurance is called underwriting. Each life insurance carrier has its own specific formula to determine how risky you are to insure, how much coverage you’re eligible for, and how much in premiums you should pay for that coverage.
Here is a general overview of the most common factors used to assess risk in the life insurance underwriting process.
The number one factor behind the cost of life insurance premiums is the age of the policyholder. As we get older, the likelihood of death increases. That is why, for example, term life insurance coverage costs more the older we get.
Life insurance carriers use statistical models to speculate how long someone with a specific profile will live. According to a 2019 Stats Canada report, Canadian women live on average four years longer than Canadian men. Women live to 84 and men live to 80. Given that women naturally live longer than men and pay premiums longer, gender is also a determinant of pricing.
Depending on the type of life insurance you apply for, many Canadian insurance carriers require you to take a paramedical exam as part of the underwriting process. The medical information from the exam verifies the medical information you’ve provided in your application. During this exam, your weight, height, blood pressure, and other metrics get documented. You may also be required to take an electrocardiogram (ECG or EKG) to check your heart function. A blood and urine analysis is also part of the exam. In terms of your health, pre-existing health conditions such as blood pressure, high cholesterol, diabetes, heart attacks, strokes and other medical conditions are all heavily rated.
Mental health is also important in assessing risk. A history of depression puts you at a higher risk and can result in much higher premiums or application ineligibility.
Family Medical History
Does your family have a history of stroke, heart attacks, cancer, diabetes or other life-threatening medical conditions? A family history of pre-existing medical conditions can predispose you to have such medical conditions in the future and result in higher rates if such medical conditions lead to early or premature death. When looking at family medical history, insurance carriers are primarily concerned with the medical history of your grandparents, your parents, and your siblings.
Being a smoker automatically puts you at a higher risk for smoking-related ailments such as cancer, COPD, diabetes, stroke, heart attacks, peripheral vascular disease and cerebrovascular disease. If you smoke, it is a red flag for life insurance companies. Smoking is not limited to just lighting up a cigarette but can also include vaping, electronic cigarettes, cigars, pipes, chewing tobacco, nicotine gum and patches or even constant exposure to a smoke-filled environment.
Life insurance carriers have become a little more lenient towards marijuana use since it became legal in Canada. Occasional marijuana smoking is accepted, similar to having the occasional social drink. However, excessive use of marijuana can impact your rates just, like excessive alcohol consumption. The use of any illegal heavy recreational drugs usually results in an automatic decline in life insurance.
Having the occasional social drink won’t impact your life insurance premiums but, excessive alcohol consumption or a history of alcoholism will. Heavy drinking can put you at risk for cancer, liver damage, brain damage, depression, high blood pressure, and coronary disorders. Even regular drinking of two to three drinks a day can result in higher insurance premiums or rejection of a life insurance policy.
Your driving record is also something many life insurance carriers look at during underwriting. If you have violations or had a negative driving incident on your record in the last three years, you’re perceived as a higher risk and could be paying higher rates.
Certain occupations are dangerous and increase the risk factor. Firefighters, loggers, stunt people, construction workers, commercial fishing, police officers, and military personnel are all examples of occupations that involve higher levels of risk.
Your future travel plans are something a life insurance carrier also heavily considers when assessing risk. Travelling to dangerous places or war zone areas where hospital care is limited, infectious diseases or outbreaks may be more rampant, and ongoing political instability can put your overall safety at risk and indirectly impact your life span.
What you like to do in your downtime as a hobby can also impact how life insurance carriers rate you. Are you into sky diving, paragliding, or mountain climbing? Such activities put you at greater risk and are of concern to life insurance companies. So, if you like to fall out of planes or jump off mountains, be prepared to pay more for life insurance.
Life insurance carriers usually conduct a soft inquiry on your credit report. They are more concerned with the factors that contribute to your credit score rather than the number itself. Filing for bankruptcy, late or missing credit card payments, and carrying a large credit card balance, as well as a high percentage of credit card use can translate into higher premiums or even application ineligibility.
A criminal background check is standard with any life insurance application. Having a criminal record and being incarcerated is indicative of a high-risk lifestyle and can impact your application eligibility.
When applying for a life insurance policy, it’s best to work with a Licensed Life Insurance Advisor such as our Agent Team at MacDev Financial. A Licensed Life Insurance Advisor can walk you through the application process step by step and answer questions you might have so you feel more comfortable and prepared.
To increase your chances of getting a better rate, aim to live a healthy, active lifestyle and don’t put off purchasing life insurance if you still need to create a financial security net for your loved ones, regardless of your situation.
A simplified issuance life insurance policy might also be an alternative if you need to apply for life insurance coverage quickly or don’t want to submit to an in-person medical exam. A simplified issuance life insurance policy is faster to process with minimal medical questions asked.
Our Agent Team can discuss this as a viable option and other options you can consider if you’re concerned about your eligibility for a life insurance policy based on any of the above risk factors.
Disclaimer: The material provided in this newsletter is for informational and/or educational purposes only. The information, opinions and/or views expressed in this newsletter are those of the authors and not necessarily those of the distributor. All financial endeavours should be vetted through a financial professional: life insurance broker, financial planner, accountant, lawyer, and/or other professional, as the reader, sees fit. MacDev Financial Group Corp., SET Financial Solutions Inc., including but not limited to its agents, staff, associates and/or partners will not assume any liability for any information printed in this article; indirectly, or assumed. The MacDev tagline, “Financial Control For Life” and “Bank On Whole Life” are trademarks of the MacDev Financial Group Corp. Click Legal for further information