Life Insurance and Your Mortality

They say that nothing in life is certain. Well one thing certainly is; your mortality. It's just a matter of how mortal you are. At least that is how life insurance companies try to look at it. Ever wondered how mortality is measured and how that may affect your insurance premium?

When you apply for a life insurance policy you will complete a questionnaire. This will provide the insurance underwriter with personal information such as your past, current and genetic health situation. Based on this information they may request additional medical examinations in order to better understand your situation. This helps them determine whether it is a health factor they should consider or treat as irrelevant during their assessment of your application.

Life insurance companies have a system for rating you and your mortality. This is largely based on statistical mortality rates used by insurance underwriters. Simply put this is a system of classifying people into mortality groups using a 'numerical rating system'. Each health factor considered affects mortality, either positively or negatively. If you look at this as a credit or debit system then the process is a little easier to understand.

Assume that every health factor is assigned a value. The combination of these individual scores then creates a 'risk score card' for the applicant. The higher the score, the higher the risk and most likely the higher the cost to you.

Let's assume the standard mortality group is represented by 100 points and is assumed to represent all of the manageable or expected health challenges faced by the average person. This is then offset by debits for unfavourable factors such as impairment and credits for favourable factors. For example, assume an applicant has high blood pressure but a normal ECG then the score card may look something like this:

(High Blood Pressure 200pts) - (Normal ECG 50pts) = (Extra Mortality 150pts)
The mortality score for this person has gone up from the standard 100 points by 150 points to 250 points and therefore a new mortality grouping. Not great, but it would have been worse if that person didn't have a good ECG.

Under certain circumstances the extra mortality of two impairments could be greater than the sum of the two. The interrelationship between the impairments could cause a further increase in the mortality rating. For example, assume an applicant has high blood pressure and is overweight then the score card may look something like this:
(High Blood Pressure 200pts) + (Overweight 25pts) + (Combination 50pts) = (275 Extra Mortality points)

The mortality score for this person has gone up from the standard 100 points by 275 points to 375 points and therefore a new mortality grouping.

The insurance underwriter then uses the score to determine the risk associated with the application. This risk is then used by the actuary to calculate an appropriate premium for the applicant. Therefore a person's medical condition and the mortality score have great relevance to the life insurance policy.
All of my examples have been created to help explain how the process works. Everyone is different. If you want to understand it in context of your situation you must speak with a qualified insurance adviser.

Everyone has different drivers and levels of risk, and this Risk Calculator can be used to help you confirm yours and understand where mortality plays its part. About the Author: Mary Kendall writes for MultiCover, specialising in personal risk insurance. Her goal is to provide consumers with a better understanding of personal risk insurance. MultiCover Life Insurance Australia - Insure Your Peace of Mind.  For a customised personalised risk management strategy that matches your needs. Minimize the financial risk associated with a life hazard event (injury, illness, permanent disability, medical traumas and death) and provide peace of mind.

How Being a Smoker Affects the Cost of Life Insurance

When you apply for a Life Insurance policy there are a number of health related questions that are asked. One of those is whether you are a smoker or a non-smoker. On that point alone insurance companies will charge a higher premium if you are a smoker. This is because a smoker has a statistically higher mortality rate (see my article: Life Insurance and Your Mortality) than a non-smoker.

Each insurer will define how you qualify as a non-smoker and by default if you don't qualify you would be considered a smoker. An example of non-smoking qualification may be that you have not smoked in the past 12 months and have no intentions of smoking tobacco or any other substance in the future. Policies differ, so if you want to understand this in context of your situation you must speak with a qualified insurance adviser.

A study conducted by the American Cancer society found that the average smoker has about a 1 in 6 chance (16%) of developing lung cancer in their lifetime. The average non-smoker on the other hand has less than a 1% chance of developing lung cancer in their lifetime. It also found that smoking is responsible for an increased risk of cardiovascular diseases and other lung diseases such as pneumonia and bronchitis.

Simply put, if you have a statistically increased chance of being disabled or dying from any disease a life insurance company will charge you a higher premium. If the act of smoking increases the probability of suffering a disease more so than a non-smoker then there is an additional cost. Smoking may cost you an additional 30% to 50% on the premium of a non-smoker. The insurer does this to ensure they have the pooled funds necessary to offset future claims and not penalise non-smokers.

To help you evaluate the financial risks associated with a smoking related disease you can use this Financial Risk Calculator tool. The message here is that in being or becoming a non-smoker you will save money on your life insurance premiums.

About the Author: Mary Kendall writes for MultiCover, specialising in personal risk insurance. Her goal is to provide consumers with a better understanding of personal risk insurance. MultiCover Life Insurance Australia - Insure Your Peace of Mind. For a customised personalised risk management strategy that matches your needs. Minimize the financial risk associated with a life hazard event (injury, illness, permanent disability, medical traumas and death) and provide peace of mind. MultiCover Life Insurance Australia - Insure for Peace of Mind

Life Insurance Beneficiaries - The Beneficiaries You Choose Are As Critical As the Policy You Select

Life Insurance is a very important part of your financial risk management strategy. As a financial provider to your loved ones, it helps you to have peace of mind that your family's financial needs will be addressed if the worst was to happen to you.

When you arrange life insurance, you should first decide who the beneficiaries would be should the worst situation occur and you die. Unfortunately, after your death you have no control over how the benefits of your life insurance policy are distributed to your loved ones. It is sad but true that not everyone is going to want to respect your wishes after you die. It is therefore critical that you choose your beneficiaries carefully. In the same way that you do when you write your Will.

It is important to clearly specify who your beneficiaries will be. If for example you designate your estate as the beneficiary, the benefits will be paid to the estate, and may be subject to your estate's creditors. If you designate your spouse as the beneficiary, an ex-wife may file a claim. If you specify the beneficiary as "children of the marriage", any children you have adopted, or your partner's children from another marriage might get excluded. It is critical that you be specific about who the benefits are meant to be distributed to. Do not leave this critical component of the life insurance policy to chance.

Throughout your life your situation will change. In the early years, you may have young children that need a lot of financial support. They will have education, clothing, and living expense needs as they grow up. As you get older, your children may move onto higher education, and need some assistance as they make the transition from child to adult. For example, they may need assistance buying their first car, buying a house, getting married, etc. It is common place for parents to assist their children as they make this transition. What if you were not alive and able to help? In the later years, you and your partner will need to support each other and prepare for retirement. Do you both have enough money for the later years? You may choose to make investments that have significant financial commitments. For example, you may choose to buy investment properties, or shares, you may take out loans to help facilitate these investments. What if one of you was to die and the other could not maintain these financial responsibilities?

Because your situation will change over time, it is important that the beneficiaries you list in your life insurance policy are the ones that will need your financial assistance after you have died. Review your life insurance beneficiaries from time to time and ensure that the list reflects best those that depend on you for financial support.

You should also establish contingent beneficiaries. It may be possible that the primary beneficiaries die before you or die at the same time. The contingent beneficiary option is there for this situation.

The choice of a beneficiary is a very personal thing. No two people view the world the same way, or have the same financial situation. Each person will see the threats to financial security for the loved ones differently. They will have different opinions of what financial risk management really means. When you are ready to setup a life insurance policy to financially protect your loved ones, first discuss the risks and needs with your family. Another great tool available to you is a Financial Risk Calculator. The Financial Risk Calculator will help you to identify what the key risks are that you face. You can then use this information to talk to a Life Insurance adviser about how best to manage the risks that you face. When you talk to the life insurance adviser make sure that you clearly list the beneficiaries you want included on your policy.

MultiCover Life Insurance Australia Insure Your Peace of Mind Under the guidance of a qualified personal risk adviser MultiCover brings together the benefits of multiple personal risk insurance products. These are then customised to provide a personalised risk management strategy that matches your needs. The aim being to minimise the financial risk associated with a life hazard event (injury, illness, permanent disability, medical traumas and death) and provide peace of mind.