When you’re quoted a price for your life insurance premiums, it’s reassuring to know a little about how your premiums are calculated. At the very least, it’s comforting to know that insurers aren’t simply plucking a price out of the sky.
Life insurance premiums are calculated by individuals called actuaries, who are experts in risk management. The majority of actuaries work in the life insurance and pensions sectors, and use complicated mathematical techniques to measure the probability and risk of future and uncertain events.
When calculating life insurance premiums, actuaries measure the risks of illness and death to calculate an appropriate premium. In calculating the premium, they also have to take into account how much profit or loss can be made from life insurance policies, as well as ensuring they have the capital to payout all future claims.
How is life expectancy calculated?
Insurers create what is known as a ‘life table’, which retains details of the number of people dying during a defined period. These figures are analysed to calculate the probability of death at any given age. The life expectancy for an individual of any age is then calculated by simply adding the probability of survival until the remaining ages on the table, with ever-decreasing results.
Of course there are discrepancies in life expectancies, which differ depending on the group of people and the time period from which the statistics are collated.
What factors have the biggest effect on life expectancy?
Not all actuaries agree on the same answer, but five of the most common factors that affect life expectancy include:
- – Age
- – Gender – statistics show this is a decisive factor, despite regulations which dictate that premiums must be the same for both sexes
- – Smoker or non-smoker
- – Weight as a ratio of height (BMI)
- – Weekly alcohol consumption
Are there any unusual trends?
Statistics show that married people live longer than single people. Those who enjoy a happy and healthy lifestyle live longer, and this could relate to married life. However, other factors might come into this statistic, such as the fact that single people are more likely to engage in life endangering activities.
For further information about our range of life insurance policies at Easy Life Cover, call our experienced advisers today on 1890 917 917.