Most people understand the value of life insurance—you pay for it while you’re alive to protect your loved ones after you’re gone. But many people don’t understand how their health and lifestyle choices may affect their life insurance costs.

A lot goes into the evaluating and pricing of life insurance coverage—a process known as “underwriting.” In addition to making sure coverage is affordable, the insurance company must maintain the reserves it needs to pay the benefits it has promised to customers and stay profitable.


For life insurers, it’s all about risk


When you buy life insurance, your regular payments—called “premiums”—are pooled with other customers’ premiums by the insurer to help cover the cost of the benefits it pays out. The insurer accepts a certain amount of risk that customers may die earlier than expected and therefore contribute less toward the benefits it needs to pay out.

For example, a healthy, 45-year-old woman purchases a 20-year term life insurance policy with a death benefit of $500,000.1 Her annual premium is $481.50. Yet if she died unexpectedly in year two, the company still pays her family $500,000, even though it has only collected $963 in premiums.

If a large number of customers die prematurely, the company risks paying more in claims than it receives in premiums and other investment returns. That’s why it’s in the insurer’s best interest to understand the health risk of the people they are insuring and price policies accordingly—and that’s where underwriting comes in.

Factors that influence your premium rates:


  • Age
  • Nicotine use
  • Personal history: Cancer, cardiovascular disease, diabetes
  • Family history: Cancer, cardiovascular disease, diabetes
  • Blood pressure
  • Cholesterol
  • Weight


  • Alcohol and drug use
  • Criminal record
  • Driving record
  • Risky occupation
  • Private aviation

Underwriting explained

Among other things, your premium pricing will depend on:

  1. The amount of death benefit protection you request
  2. The risk you represent to the insurer

When you apply for life insurance coverage, you’ll provide a detailed health history and—typically—submit to a brief medical exam. The insurer may request your medical records and ask about lifestyle behaviors that could affect your life expectancy, such as alcohol or drug use or risky hobbies like skydiving.

An insurance underwriter will review all of this information to determine how much risk you represent. Then they will determine whether to approve your coverage and, if so, how much you’ll pay in premiums. An existing health condition won’t always prevent you from getting coverage, but it’s important to be honest when completing your application and answering health questions. A misrepresented condition or activity could lead to your policy’s cancellation or your death benefit not being paid.

Ask a professional

There are many factors to consider when buying life insurance—from the type of coverage you need to the health conditions that may affect your premium costs. To get the best product for you and your family, ask an insurance professional for help.

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