Life Insurance

How Is Your Life Insurance Rate Calculated?

Ethos Life · Jul 14, 2020
Family playing in bed son running towards bed
If you’ve considered life insurance before, you’ve probably wondered how the rates are determined by life insurance companies. There are quite a few factors that contribute to your life insurance quote—some that are in your control and some outside of it.

Which factors influence my life insurance premiums?

Underwriting is the process life insurance companies use to determine whether they can offer insurance coverage to applicants, and if so, how much the premiums will be. Underwriting departments often use information about personal health history, current state of health, tobacco use, family history, and even motor vehicle reports (among other sources) to determine how much of a risk the person applying for insurance presents. It’s important to note that underwriting is not a one-size-fits-all process. Some policies require little to no underwriting, and aren’t subject to all of the criteria listed above.

When you apply for life insurance, actuaries (the people who calculate insurance risk and premiums) analyze your data to predict your life expectancy and calculate the actual cost of insuring you. The more of a risk you present to an insurance company, the more likely they are to deny you coverage or offer you coverage at a higher rate to offset the risk.

Reasons for higher life insurance premiums

Curious about why you may be receiving a high quote for a premium at a certain company? This is because life insurance companies will often try to reduce the risk of a claim or offset claims with higher premiums. Below we break down two primary reasons that could cause them to charge more.

Health risks

Are you a heavy drinker or smoker? Do you have any existing or family history of medical conditions? If the answer to either of these questions is yes, you may present a higher risk, which can cause your life insurance premiums to be higher. Chronic conditions like depression, high cholesterol, obesity, and high blood pressure can also cause your rates to go up. Depending on your individual medical records, your application may be denied if you have significant health risks.

For this reason, applying for life insurance when you are in good health is an ideal way to secure an affordable rate. Applying for life insurance after being diagnosed with a serious health issue is risky, but if you qualify (probably at a higher rate), you can always reapply for new coverage later to see if your rate can be lowered if your prognosis and condition improves. If you go this route you should wait until you are approved at your new health classification before canceling your current policy.

Not all life insurance companies follow the same rating criteria, and your health is just one factor that will be looked at. Since the health class you fit into will depend on each individual company’s underwriting guidelines, it’s recommended that you shop around and compare policies before you commit to one.

Lifestyle risks

Your life insurance premiums can also be higher if you participate in dangerous hobbies. These include race car driving, skydiving, ultra-marathon running, surfing, wakeboarding, snowboarding, mountain biking, and snorkeling.

Even some professional-level activities or occupations can cause the person seeking life insurance to automatically be placed in a high-risk category. Noticeably dangerous activities that fall into this category include scuba diving in depths over 100 feet, hot air ballooning, flying a private plane, mountaineering, bungee jumping, wingsuit flying, hang gliding, heli-skiing, and big wave surfing.

Regardless of your situation, it’s important to be completely honest with life insurance companies. They can identify fraud and falsehoods on an application, which could lead to a canceled policy or denied claim.

If you are declined life insurance by one company, you may be approved by another. Even with serious health issues, it is possible to get life insurance—so make sure you shop around.

How is your risk classification determined at Ethos?

There are three categories Ethos will assess: health, financial fitness, and risk profile.


Your age and gender are considered at Ethos, as well as your physical and mental health (the same runs true for most other companies).

A couple things to watch out for are smoking, since smokers will pay significantly more in premiums (~50-60% more than non-smokers), and your BMI. There are actions you can take, like eating healthy and exercising often, that can help you maintain physical health.

While underlying chronic conditions within your family may affect your life insurance premium, it’s only one of the factors that Ethos looks at. Every customer is underwritten individually and several factors are considered.

Ethos optimizes underwriting to be as non-invasive as possible. Most people can apply for life insurance with us without a medical exam, and our streamlined application can be completed in minutes. Traditionally, life insurance applications could take weeks, but with Ethos, it’s fast, simple, and affordable.

Financial fitness

Your financial fitness will be assessed, but not as closely as it would be with other types of insurance, like homeowner or auto insurance. However, your credit report will be taken into consideration. Does this hurt your credit score? No. At Ethos, we run a soft credit check, which does not affect your credit score.

Risk profile

Premiums are affected by risk. At Ethos, we evaluate several aspects of your life: your occupation, hobbies, daily activities, travel, and extracurricular activities.

At the end of the day, you shouldn’t be afraid to apply for life insurance. We’re here to answer any questions you have, and when you’re ready, Ethos will evaluate you holistically, using the latest advances in data analytics to optimize an affordable premium rate and a coverage amount that takes care of what matters most to you.

One final note: Applying earlier, and while you’re in good health, is better than never. Ensure your family’s financial stability with a life insurance policy today.

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