What drives up life insurance premiums?News added by Benefits Pro on July 29, 2014

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By Kathryn Mayer

In life insurance policies, you can count on men and smokers not getting the best deals. They’re two groups that are paying significantly more for their policies, according to a report from InsuranceQuotes.com.

Men pay an average of 38 percent more than women for the exact same life insurance policy, the report found. As for smokers, well, they are paying a whopping 235 percent more than non-smokers — more than three times more.

For example, a non-smoking 45-year-old female pays $45 per month for $500,000 of 20-year level-term coverage and a 45-year-old female smoker pays $167 per month. That’s $1,462 more over the course of a year.

Smokers are paying more for obvious reasons: Smoking causes one in five deaths in the United States per year, or about 480,000 annually, according to the U.S. Centers for Disease Control and Prevention.

“A smoking habit can lead to many health problems that increase the risk of death — such as heart disease, lung cancer and diabetes,” InsuranceQuotes.com reported. “Therefore, insurers have no choice but to hike the cost of a smoker’s policy.”

While higher payments for men might not seem as obvious, it comes down to a similar reason: risky behaviors. Men are paying more due to shorter life expectancies, researchers said, as they have a greater risk of cardiovascular disease, various cancers and accidental injuries. Generally, men have riskier jobs (such as roofing, logging and piloting, which top the list of jobs in which fatalities occur) and hobbies (think car racing, skydiving and bungee jumping).

On the other hand, women accounted for less than 10 percent of the more than 4,500 fatal workplace injuries, according to the U.S. Bureau of Labor Statistics.

Age also factors into costs, the report found. For example, 35-year-olds pay 27 percent more than 25-year-olds for the same coverage. The gap grows over time: 45-year-olds pay more than twice as much as 35-year-olds (120 percent more). The increases get even steeper after that, InsuranceQuotes.com found.

Besides quitting smoking — an insurer will generally knock down premiums for people who have been smoke-free for two years — analysts say there are other ways to trim premiums.

“You can save a lot of money by getting life insurance while you’re young,” said Laura Adams, senior analyst for InsuranceQuotes.com. “By locking in a level-term policy in your 20s or early 30s, you will benefit from much lower rates while protecting your loved ones for decades to come.”

Originally published on BenefitsPro.com
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