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Losing Weight Can Reduce the Cost of Life Insurance

Losing Weight Can Reduce the Cost of Life Insurance

Losing Weight Can Reduce the Cost of Life Insurance


Losing weight is beneficial to both health and wealth as well as peace of mind when it comes to protecting the things we care about.

Many people have life insurance designed to pay off debts like a mortgage or to provide some additional financial security to family members in the event of death or even just to cover funeral costs.

Being overweight or having a high BMI (Body Mass Index) can sometimes make it difficult to obtain life cover or it could mean the cost of cover is increased.

A life insurance premium with a price increase is said to have been 'rated'.

Life insurance companies generally use BMI as a guide to an individual's weight related health but a BMI is simply a ratio between a person's height and their weight and some may argue this is unfair because certain sportspeople can be muscular and therefore heavier.

Some insurance companies claim that the additional strain put on the heart as a result of having a bigger build is the reason they increase the price regardless of how that weight is distributed.
Other insurance companies are more sympathetic and appreciate that carrying extra weight around the waist poses more of a risk than having broad muscular shoulders so they will want to know an individuals waist size as well as their height and weight to determine the extent of any additional risk.
Insurance companies all tend to have different guides and treat applicants differently. Some will have a relatively low tolerance for applicants with high BMI's compared to others. Some will just look at the BMI and some will look at BMI as well as other factors such as age, smoker status and any other medical conditions.

Most will have a BMI threshold below which they can offer cover at standard prices and above which they will incrementally increase the cost based on a percentage of the standard price.
These BMI thresholds and price increments can be viewed as a target for lower costing life insurance.
As a rough guide, a very high BMI may attract a 'rating' of say +200%, a slightly lower BMI may be rated at +150% and as the BMI goes down, the rating can come down to +100%, +75%, +50% right down to standard prices.

The monthly cost can be calculated approximately using the following formula:
(starting price x percentage rating) + starting price = actual rated monthly premium
E.g. A starting price of A�25 with a +200% rating would cost:
(A�25 x 200%) + A�25 = A�75
As you can see, a +200% rating is actually 3x the standard price.
This is only approximate but the actual price would only be slightly different (probably very slightly less).

As a person's weight comes down and their BMI reduces the percentage rating can also come down. In some cases the insurance company can apply this reduction to an existing policy but others will need the policy holder to submit a fresh application.
Using the figures above here are some calculations to show how the different ratings affect the price and how much the price can come down as weight comes off.
(A�25 x 200%) + A�25 = A�75
(A�25 x 150%) + A�25 = A�62.50
(A�25 x 100%) + A�24 = A�50
(A�25 x 75%) + A�25 = A�43.75
(A�25 x 50%) + A�25 = A�37.30
(A�25 x 0%) + A�25 = A�25

It is clear to see how the BMI thresholds can affect the cost of cover and how by losing weight the price can come down.

Someone who is overweight and seeking life insurance could take out a policy with a high rating and as they reach each target BMI they could either notify their insurance company or simply re-apply for a new policy. Or they could just keep going with their weight loss regime and reapply when they reach their desired overall target BMI.

Insurance companies may want to send a nurse out to take some measurements to verify the weight loss before lowering the cost of cover.

The figures above are only an example and to find out the actual BMI figures that relate to the various ratings it would be necessary to speak directly to the insurance companies or to get in touch with an adviser who can do it for you.

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