The concept of life insurance is simple: Although you hope you live a long life, you also pay a company to make sure that if you die sooner rather than later, your survivors have something to fall back on. The company, similarly, is hoping that you don’t die before it has a chance to make more on what you pay than the cost of paying your survivors. You know that you will die eventually — the only question is when. Your only gamble is which insurance company you choose.
But companies don’t like to gamble, so they stack the deck. The more likely you are to die sooner rather than later, the more the company needs to get from you in the early years of your policy. If, on the other hand, the company can count on you being around for a long time, it doesn’t need as much each month to make a profit from your premiums. So how does the company make this judgment? It uses the answers to two questions:
To qualify for a life insurance policy, you have to pass two conditions: You have to be young enough, and you have to be healthy enough.
The age condition is based strictly on statistics gathered for large numbers of people. If you’re older than 60 or 65, most companies won’t insure you. If you’re younger than that, the company will insure you, basing your premiums on your age. To judge your medical condition, the company will ask you to provide your complete medical history and, for most policies, will ask you to undergo a medical exam.
But companies don’t like to gamble, so they stack the deck. The more likely you are to die sooner rather than later, the more the company needs to get from you in the early years of your policy. If, on the other hand, the company can count on you being around for a long time, it doesn’t need as much each month to make a profit from your premiums. So how does the company make this judgment? It uses the answers to two questions:
- Based on complicated statistical analyses and longevity charts, how long are you likely to live?
- Based on your medical history and information, are you a high or low risk?
To qualify for a life insurance policy, you have to pass two conditions: You have to be young enough, and you have to be healthy enough.
The age condition is based strictly on statistics gathered for large numbers of people. If you’re older than 60 or 65, most companies won’t insure you. If you’re younger than that, the company will insure you, basing your premiums on your age. To judge your medical condition, the company will ask you to provide your complete medical history and, for most policies, will ask you to undergo a medical exam.
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