I know I wrote about reducing insurance cost earlier, ways to reduce insurance premium. One of the tips was to shop around and get quotes from as many places you can find. Well, have you ever thought why different insurance providers charges different premium to put a price tag on your life? For me I didn’t have to comparison shop for life insurance, my employer has a group life plan covered through our health insurance provider. In case you want to know how premiums differ for the same life, here’s a guest post from a life insurance agent, Frank Mitchel. Enjoy the post!
Life insurance, like anything else available on the market, is a commodity. Any competent businessman will tell you that with a product available on the market, there’s always leeway to negotiate the price. While this may be true for 99% of the products out there, it doesn’t really work for insurance though. Companies are very strict in their pricing structure and won’t give any quarter to your cheeky little bid for a bargain.
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That charming smile and impish wink may work on the person serving you at the supermarket, but it’s highly unlikely to work with an insurer.
(Related – Basics of Insurance: Why we Need Insurance?)
What you can do, however, is play the market. There are many insurance companies out there, and they all evaluate premiums differently. This is precisely why you have a shot, as the same individual, with the same credentials, to get a better deal at a different company.
Factors that determine one’s premium cost
- Age. Age is just a number right? Go tell that to the insurer! For them, age is a very important factor in deciding your premium. It’s kind of obvious isn’t it? The older you are, the more likely you are to meet your Maker.
- Sex. Those who campaign for equality of the sexes might want to look away for this bit. Science shows that men and women live different life spans, so you may have to pay more as a man than a woman even if you are otherwise identical.
- Health. Again, pretty straightforward this one. The better health you’re in, the cheaper the rates because if you have a healthy disposition you’re less likely to pass away any time soon, and as such are a safer bet.
- Location. Where you live also has bearing on your premium rates. If you live in a disaster prone or crime prone area, you’re more of a health risk, hence you pay more.
- Insurance and Credit history. Say you pay your bills on time, you’ve never missed a premium payment in your life, and your finances are clean as a whistle. The insurer knows you’re less likely to default, so you’re rewarded with a lower premium.
- Job Profile. A guy who performs a 9-to-5 job in an office building with a good disaster management program will be relatively safer to the guy who’s working at the construction yard when said building was being built. It’s straight logic. The less risky your job, the greater the reward in terms of low premium rates.
Now these are just some of the factors that affect premiums, the more common ones. I know I said all insurers assess premiums on a similar group of factors. So logic says the premium should be the same across the board.
It doesn’t work like that though. Insurers decide the amount of weight each factor has on your premium rates differently, so this is where it gets interesting.
Company A might feel your job profile gravely affects your insurance rate, while Company B might think your location is more important. Hence a guy living in a safe district in a risky job will get a better deal at company B rather than Company A, and vice-verse. It doesn’t even need to be as cut and dried as that.
(Related – 3 Unusual Ways to Lower Your Insurance Premium)
If company A has had more women filing claims than men in just their firm, it will reflect in their statistics. Therefore they might actually give you a cheaper rate for being a man! It may not make perfect sense logically, but it works for them, so who are we to argue?
So when you decide to buy that insurance shop around, spend a little time and effort on research, and see who offers the best deal that suits you as an individual. In the age of the internet, that’s so easy too, just log on to a quotation comparing web service such as SelectQuote, IntelliQuote or AccuQuote but to name a few.
However, exercise caution when picking these websites, some may favor a particular company based on their commission margins or advertising partnership. Pick a more popular website with a range of insurers under their banner; they’ll be less likely to take a partisan approach to providing you with a quote.
(Related – Why do We Need Health Insurance)
Another thing, read the fine print! Some policies may be cheaper because they are less comprehensive, while a slightly more expensive one may offer you free riders, longer terms or other added benefits.
So shop smart and find that bargain, and you won’t even need to rely on the ol’ cheeky grin and impish wink technique.
About the Author: Frank Mitchell has worked as a life insurance agent for 10 years. After an accident in 2011 that kept him at home for more than a year, Frank started offering advice on forums and other social media networks. He now works as financial advisor and in his spare time writes articles on subjects he is passionate about. On the weekends, you’ll find him dirt biking.