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.
Note – Get your life insurance quote now, visit Quote Whiz to get quotes on premium amount instantly from all major insurance providers, including ING, HSBC, Transamerica, etc.
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.
Richard Jonas says
Overall, there’s some good basic information in this article but there are also a few things I’d like to add.
First, I would disagree though with the statement that factors unique to where you live (crime, natural disasters, etc.) affects life insurance costs. Costs can vary by state but that’s because each state regulates the insurance carriers doing business within their jurisdiction, including the rates they can charge.
Second, the article failed to mention one of the primary factors driving price differences among the carriers – competition. Insurance companies compete with each other in many ways and one of the biggest areas of competition is price. That simple.
Just last week, I attended a webinar where one of the biggest life insurance companies in the world was discussing upcoming price reductions. And just today, I received a bulletin from another major insurer also announcing price cuts.
Thank you for your valuable input Richard!
I negotiate on everything! Life insurance is something I shop to find the lowest premium.
Matt Becker says
I like term4sale.com as a site to compare prices. It’s free and you don’t have to give out any contact information. And I found their quotes to be extremely accurate. As an aside SB, if you truly have a need for life insurance I would suggest getting an individual policy for the full amount of your need, outside of what you have from your employer. It’s much safer to have your own policy that you actually own than to rely on both staying employed with the same company AND the company continuing to offer the policy.
Richard Jonas says
I agree with Matt’s comment that having your own life insurance coverage (as opposed to group coverage through your employer) is a good idea. Matt is right when he points out that your employer can always decide to drop the group life insurance coverage or reduce its benefits.
But most group life insurance coverage is also convertible and portable. “Convertible” means that you can switch your policy from term coverage (which is what group policies are) to permanent insurance such as whole life or universal life within 30 days of leaving your employer. The cool thing is that you can convert to a permanent policy with no medical exam. “Portable” coverage allows you to continue the coverage on an individual basis, even if you leave your employer. It’s similar to the way COBRA works. You’ll have to pay more for the same coverage but you won’t have to take any medical exams to qualify as long as you make the switch within 30 days.
Also, since Matt suggested a particular company to compare life insurance quotes, let me do the same. My company, PrivateQuote.com, allows people to receive highly accurate and reliable quotes while remaining 100% completely anonymous. I leave the customer in complete control of if and when they provide us with their contact info. Customers who work with us receive free, unbiased professional consultation with no high-pressure sales tactics.
Tushar @ Everything Finance says
I have life insurance through my work, and I got it at a great rate. Because it’s such a low rate, it’s not negotiable. As I age my rate will go up. There were a lot of other companies that offer life insurance that I got quotes from but mine is by far the best.
The College Investor says
When I bought life insurance, I shopped online for a bit, then went with SelectQuote. The prices were lower and they gave me about 10 different options with all the various insurance companies and their pricing.
The other thing to remember is that your initially quoted rate could change after the physical, especially if they find something.
Richard Jonas says
College Investor, your observation that the results of the medical exam can change the cost is 100% right.
I wanted to clear up a common misconception though. SelectQuote has no ability to change the quoted cost of a particular life insurance policy. When SelectQuote gives you a quote, they are simply passing on the information the insurance company provides about the cost of that coverage. SelectQuote is not allowed to increase or decrease the cost of the coverage. The cost of a policy is 100% up to the insurance company.
sandra lovelace says
I’ve got a life insurance policy by means of my own function, in addition to I acquired the item at the good pace. Due to the fact it’s such a small pace, it’s definitely not negotiable. As i age my own pace should go upward. There was many other programs that offer a life insurance policy i obtained quotes from but quarry will be definitely the very best.
Money Club says
If you want a cheaper quote, you could just go for decreasing-term cover (at least you can here in the UK, I’m not sure how it works in the States). The amount of cover you have decreased over time, as the amount of mortgage you have left to pay goes down. Cheaper, but less comprehensive.
Jason Fisher says
Great read. By far the greatest impact you can have to keep your rates down is your Age. As you mentioned, the older you are, the more you’ll pay. But most people think it’s a linear increase.
Up until 35, rates are pretty similar for the most part, except for the higher death benefit amount. But someone at 40 could pay HALF of what someone at 49 does for the exact same policy. Premiums start rising much, much faster after 50.
There is no flexibility on age!