Reader’s Question:

I am choosing from a few life insurance providers here in Oklahoma, and I would really like to know how life insurance companies compute for rates or premiums.

Charles

Norman, OK

Of course each and every life insurance company has it’s own system of determining your exact premiums or rates but it’s safe to say that there are a few, specific factors that is generally used to determine consumers life insurance premiums.

1. Mortality rates – The last thing that a life insurance company would want is to pay death benefits within the first few years of a life insurance policy. This means that insurance providers would be asking some information to assess your risk of costing them money if they decide to give you coverage. Every year life insurance providers use mortality tables that helps them determine how much money to set aside to pay for total death benefit costs and this has an impact on how much you pay, the older you are the higher your rates will be since the risk of death is higher.

2. Health – Similar to reasons why mortality rates are used, your health and family’s medical background has a major influence on how your rates are determined. You can even be denied coverage there in Oklahoma if you have a severe medical condition or illness.

3. Interest and Expenses – Of course it’s still a business so it’s hardly surprising that the life insurance company’s expenses also play a role in your overall premiums. Also, life insurance policies may earn you interest based on its cash-value, so your regular premiums may reflect how much cash-value you have to attain in order for your money to earn interest, and the for the company to earn profit.

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