Ch.3 Factors Affecting Premiums, Rating of Life Insurance and Selection Criteria

PREMIUM FACTORS Some criteria which help to determine premiums:

1. Age of proposed insured 2. Sex (females pay lower rates since they live longer) 3. HEATH HISTORY of proposed insured 4. FAMILY HEALTH HISTORY 5. PERSONAL ACTIVITIES OR HOBBIES (ex. dangerous activities like skydiving) 6. PERSONAL HABITS (ex. smoking) 7. Occupation 8. Salary, earnings, wages 9. Travel outside the country (ex. exposure to additional risk)

SELECTION CRITERIA

1. STANDARD RISKS: a proposed insured in good health who is assessed standard (ex. normal) premium rates. 2. SUBSTANDARD RISKS: a proposed insured who has health problems. Some may be declined. Others who obtain coverage may be "rated up" and CHARGED A HIGHER PREMIUM. 3. PREFERRED RISKS: Proposed insured in excellent health receives a lower premium rate. These types of risks die prematurely less often than standard or substandard risks.

INCREASED RATING METHODS

1. STEP-UP-IN-AGE OR RATE-UP-IN-AGE: The proposed insured is 45 years of age but because of substandard classification is rated as a 50-year-old. 2. FLAT EXTRA RATE (ex. flat additional premium): The proposed insured's rate per thousand is increased from $12 per $1000 of coverage to $15 per $1000 of coverage. 3. PERCENTAGE OF THE NORMAL RATE: The proposed insured's rate is multiplied by 150% or @00% ( ex. stunt pilot) because of the substandard or high risk classification.