Thinking of people as a whole, some are healthier than others. Within each age group, the probability of death is greater for some than others. These differences in risk stem from one’s physical condition, occupation, sex, and other factors—we’ll get into these more a bit later.
Long story short, your risk of dying is not based on age alone.
Life insurance companies decide how much your life insurance policy will cost based on risk factors. The more risk factors you have, the more you pay. It doesn’t make sense to allow someone with a greater probability of death to pay the same as someone who likely won’t die for another handful of decades.
The life insurance companies have established a range of mortality expectations in which someone would be considered an average risk and would then pay a standard rate for life insurance. Individuals who have fewer risks than the average would then pay less for life insurance—preferred rates. Individuals who have more risks than the average would pay more—substandard rates.
Factors Affecting Risk
In order for an insurance company to determine what risk class an applicant is, they rely on evaluating factors that may impact an applicant’s longevity.
These risk factors include: