life insurance Cost explained - a quick guide

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Insurers will mainly base your life insurance rate on your health and age. Some additional factors include your weight, whether you smoke (vaporise or any nicotine product), your occupation and even your family health history.

LifeCovered has arranged rates for a variety of life insurance policies and customer profiles to calculate the average cost of life insurance.

You can learn how insurers price life insurance and how to get a low cost policy to protect your family.

How much does life insurance cost?

If you want to know a little more, you can learn about what exactly goes into the cost of your policy. Knowing what goes into the cost before you get life insurance quotes can help you make the best decisions during the application process and find a policy that fits your budget.

In this article we discuss

1.0 Average rate for age life insurance cost by gender

We started our research by showing the change in average life insurance rates for different age groups. Life insurance companies will use age as a cost factor for life insurance premiums. Rates will continue to increase as you age due to a decrease in your total life expectancy.

The rate for age life insurance quotes below are for a healthy man and a health female with a death benefit of $500,000.

Average cost of life insurance for 30 yo and 50 yo female

wdt_ID Insurer Credit Rating 30yo/f 55yo/f
2 AIA AA- (Very Strong) Standard & Poor's 33.76 137.01
12 Asteron Life A+ (Very Strong) Standard & Poor's 25.81 149.19
17 Partners Life B++ (Good) A.M. Best 28.43 149.09
18 Fidelity Life A- (Excellent) A.M. Best 26.31 161.72
19 OnePath A+ (Strong) Standard & Poor’s 25.85 155.31

Average cost of life insurance for 30 yo and 50 yo male

Besides age, life insurance quotes will vary depending on your gender. On average, men will pay 25.5% more for rate for age life insurance than women.

This is due to life expectancy because men tend to have a shorter life expectancy compared to women. Life insurers take this into account and thus will charge a man more expensive rates than a woman who is the same age.

wdt_ID Insurer Credit Rating 30yo/m 55yo/m
2 AIA AA- (Very Strong) Standard & Poor's 41.20 176.83
12 Asteron Life A+ (Very Strong) Standard & Poor's 37.63 187.69
17 Partners Life B++ (Good) A.M. Best 38.85 185.36
18 Fidelity Life A- (Excellent) A.M. Best 39.53 199.84
19 OnePath A+ (Strong) Standard & Poor’s 35.95 192.15

2.0 Rate for age vs level policy

The vast majority of insurance policies sold in NZ are ‘Rate for Age’ policies. This means the price increases each year in line with your age.

‘Rate for Age’ policies allow you to insure a larger sum because it’s cheaper in the early years, but becomes more and more expensive as we reach our 40,’s, 50’s and 60’s.

Comparing cost of life insurance is what smart people do.

The ‘Level’ Premium option can save an enormous sum of money in the long term.

‘Level’ life insurance costs you more for the insurance cover at first, but after 5, or 7 years break even with the ‘Rate for Age’ premium. Thereafter you’re ahead – meaning you have ultra low-cost Life Insurance you can afford to keep in your later years when most others are letting it go due to the cost.

3.0 Your health

Your health status is one of the most important factors in determining your premiums.

The healthier you are, the less likely you are to die, and thus cheaper to insure.

During the underwriting process, you’ll have to answer some questions about your health and your family health history.

The insurance company may also request a Personal Medical Attendance Report (PMAR) from your doctor to get their assessment of your health as well.

And sometimes the insurer can request a new medical or blood test be done free of charge. 

This new medical or blood test can be done at your doctor’s clinic or the insurer will arrange for a mobile nurse, to set an appointment with you and your home or office. Either way it’s free of charge.

Some things that might result in higher premiums include:

  • Angina
  • Arthritis
  • Blood Pressure –
  • Hypertension
  • High cholesterol
  • Hypoglycemia
  • HIV/AIDS and hepatitis
  • Recreational drugs including marijuana
  • Nicotine use
  • Chronic illness

If you use marijuana, your insurance company might also take that into consideration or even classify you as a smoker. 

However it’s still possible to find providers to accommodate your lifestyle and health status whether you’re a smoker, former smoker, or marijuana user so it’s important to shop around.

Similarly, chronic illness or pre-existing conditions also tend to warrant higher premiums, but it’s possible to find life insurance coverage with the right provider.

It’s already proven that active people live healthier and longer.

 

3.1 Body Mass Index (BMI)

BMI has been used as a key indicator for health as there is significant medical evidence linking a high BMI to increased chances of a person developing heart disease, diabetes, cancer, and liver problems.

A high BMI can complicate the recovery from some conditions and puts extra strain on joints.

For these reasons, customers who have a high BMI require a loading that reflects the increased risk that it presents.

The good thing is that, unlike some conditions, we are able to review a loading for BMI when a weight loss is stable and any other bloods are within normal range.

Body Mass Index (BMI)

wdt_ID Classification BMI Risk of Co-morbidity Possible Loading
1 Underweight 18.5 Low (but risk of other clinical problems increased) 0 -/+ 50%
2 Normal Range 18.5 - 24.9 Average Nil
3 Overweight 25.0 - 29.9 Mildly Increased Nil
4 Obese Class 1 30.0 - 34.9 Moderate 0 - 50%
5 Obese Class II 35.0 - 39.9 Severe 50 - 100%
6 Obese Class III >40.0 Very Severe 100%+

4.0 Cost of life insurance for smokers

Underwriters consider how often and how much you drink alcohol, whether you participate in high-risk sports and adventures. But smokers tend to pay the highest premiums.

If you have not smoked at all for a period of 12 consecutive months, you are considered to be a non-smoker.

Smoker rates apply if the following forms of nicotine or smoking alternatives have been used in the last 12 months:

  • Cigarettes
  • Taylor-made and self-rolled own cigarettes
  • E-Cigarettes / Vaping (with or without nicotine oils)
  • Nicotine patches
  • Cigar smokers – 1 or more per week
  • Chewing tobacco
  • Pipe smoker – 1 or more per month
  • Hookah/Shisha – 1 or more per month
  • Bidi – daily use
  • Marijuana – daily use

5.0 Your age

According to the Stats New Zealand, life expectancy in New Zealand is 83.6 years for women and 80.2 years for men.

So women will always pay less for life insurance compared with a man of the same age and health with similar risk factors.

Key facts
Life expectancy at birth is 80.2 years for males and 83.6 years for females.
Life expectancy at age 65 is 19.6 years for males and 21.7 years for females.

Waiting to buy will always be more expensive.

6.0 Hobbies / Hazardous occupations

Although most occupations are insurable at standard rates for life insurance, there are certain occupations, which are obviously hazardous and additional premium (loading) is required to cover the extra risk(s) incurred.

A greater number of occupations will require extra premium and/or exclusions in respect of disability benefits.

Not all hazardous risks are physical in nature, there may be one of a number of other risks which might include: 

  • Physical risk e.g. working at heights or with explosives
  • Environmental risk e.g. mining, asbestos removal / exposure
  • Moral risk e.g. exposure to drugs, criminal activities or Sexually Transmitted Infection(s) (STIs)
  • Sensitivity to claim – people with strict medical criteria e.g. Pilots
  • Trade sensitive – jobs that are subject to ups and downs e.g. real estate
  • Health risk e.g. working excessive hours or specific medical conditions

It is important to give a full disclosure of any hazards involved in your client’s occupation as this will allow the underwriter to correctly assess those risks and apply terms, if required, appropriately.

7.0 Gender

Life insurance is priced by mortality tables.

Life expectancy tables will show the average life expectancy for your gender and age. If you smoke, participate in dangerous activities, or have health problems will also affect you mortality rate.

Statistics from Stats NZ show women live an average 3.4 years longer than men. And this is the simple reason why cost life insurance is lower for women.

Why is there a difference you might ask? Men are considered a higher risk. 

8.0 Methodology

Average life insurance cost by age were calculated based on quotes from five of the largest insurers:

  • Asteron
  • AIA
  • Partners Life
  • Fidelity Life
  • OnePath

Costs shown are for a man or woman in fine health. 

Below is the breakdown of each rate class:

Cover accepted

Cover accepted with special terms

Cover deferred due to special circumstances

Cover declined

9.0 How can I lower cost of life insurance?

Your overall medical history and other factors may be out of your hands. But you can take a few steps to potentially lower your premium.

Quit smoking

If you’re a smoker, a logical step to reduce your premium — and improve your health — is to kick the habit as soon as you can. Doing so can help you avoid rates that are double or more that of a nonsmoker.

Cut down on drinking

A few drinks won’t have much of an effect on your rates. But if you tend to enjoy more than a drink a day, consider reducing your alcohol intake for lower rates.

Get in shape

Insurers consider your weight and how much you exercise an important part of determining risk. A lower BMI typically results in cheaper rates.

Consider major life changes

Your life insurance policy should change with your needs. For instance, after your children are grown and supporting themselves, you can often decrease your coverage.

Look for discounts

A trick to keeping more money in your pocket is to look opportunities to save. Talk with your provider about the possibility of cheaper premiums with a family or joint policy, rather than an individual plan and consolidating cover with one provider.

Join a wellness program

With the AIA Vitality app Kiwis can easily track their health and be rewarded for making healthier choices. AIA insurance has moved from being a payer of claims, to a partner in the health and wellbeing of our customers. It is a total culture revolution in the insurance market, since customers receive rewards and discounts for healthy habits.

10. People Also Ask

The cost of life insurance is increasing. What can I do?

‘Rate for Age’ policies increases each year in line with your age. You need to think about 1) how long do you want cover, 2) Level premiums – that don’t increase with age.

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