Financial Literacy: Back to Basics

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You might have the basic knowledge about life insurance policies, and it is certain that you already know that to every person, the services and cost is different. How do the insurance companies compute their customer’s premium and what are the factors that affect these computations?

Listed here are the factors that will affect the computations of a consumer’s life insurance policy:


This is the main factor that can affect your insurance policy. The younger the applicant, the lower his or her premiums will be. This is because when you are still young, you are still healthy and fit which qualifies you to receive discounts from them.

It is a fact that the older the person is, the nearer they are to their inevitable demise and they would claim their policy sooner rather than later thus increasing the insurance premium cost for them.


According to studies, females tend to live longer than males. That is why, although biased, women tend to have a lower rate compared to the rate of male applicants. Also, men tend to do more adventurous and risky activities compared to women making their premium higher.

Way of Life

Insurance companies will do a background check on their applicants and check to what kind of life you are living. If you are the kind of person who likes to travel or do extreme activities like mountain climbing, surfing, or bungee jumping, then you will likely have a higher premium compared to other people who are more into a more peaceful activity.

Another thing they will look into the way of your living is if you have vices like smoking or drinking. As everyone knows, having these kinds of vices is a health risk to themselves therefore resulting in a greater amount of insurance premium cost for you if ever you are found out that you do have these vices.

Medical Records

As what was stated earlier, the insurance companies will do a background check on you, including your medical records. They will delve into your records looking for something that would either make your premium higher or lower.

If your family has a history of illnesses like diabetes, heart diseases or other health problems that can be genetically transferred, the insurance company will take this into account for the final computation of your insurance premium cost.

The insurance company will also do a medical examination on you so that they can be sure that what you placed on your application is not false.


The insurance company will also take into consideration the amount of coverage you are asking for, the larger the asking amount, the higher the premium is going to be.

These are the factors that can affect the amount of your premium on your insurance policy, you can either follow them so that you can save a lot of money, or if you rather smoke, drink and do extreme sports is all up to you, but you must have a lot of money if ever you wanted to purchase your own life insurance policy.

Hello, I have been working as an investment consultant and author for more than 20 years. I love what I do and I have enriched everyone around me. A lot of money is not important, the main thing is how you use the money.

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