What are Typical Life Insurance Premiums?

Life insurance is all about risk management. When setting the typical life insurance premiums, insurance companies take important precautions, to ensure that their policyholders do not die prematurely. Therefore, this is the reason why life insurance premiums cost as much as they do.

To account for health risks such as diabetes, blood pressure and other diseases, insurers allocate the status (using the title such as standard or preferred) depending on the health, gender and age of applicants. This determines the typical life insurance premiums that the policyholder has to pay for a particular form of life coverage.

Now, to determine the status and health and to decide the premium amount, the insurer will verify the medical history of the family, the lifestyle of individual and other such factors. Most likely, it will require the person to undergo a physical examination. Hence, it is important for the policyholders to remain truthful, while they fill their health questionnaire.

If a policyholder furnishes wrong information, an insurance company not only stops the payments of typical life insurance premiums, but also nullifies the entire policy. And you wouldn’t want that.

For instance, if the policyholder mentions, that he is a non-smoker, but ends up dying with lung cancer, there are high chances that the insurer may deny any health benefits to the beneficiaries of the policy.

However, certain risk factors are beyond the control of a person. This includes age or gender. Since women have a higher life expectancy as compared to men, they have to pay lower premiums on their insurance.

Conversely, since men have shorter life spans, they much higher premiums for their coverage. Even the age of a person, has its effect on the insurance premium. For instance, young people have to pay lower premiums for a longer period, as compared older people especially men.

More About Typical Life Insurance Premiums:

Each insurer has its own typical life premiums that it charges. In a case, where a person suffers from a risk factor, it is better, to alert the agent about the problem when it comes to buying the policy itself.

Risk factors are controllable and the policyholder can seek a doctor’s help for that purpose. Hence, it is important to eliminate the risk factors. For example, stop smoking, control alcohol intake, reducing body weight, and maintain healthy lifestyle, etc. are all good ideas.

Insurance agents know that insurance companies, charge higher premium amounts to those people, who suffer from such risk factors. Hence, such agents may suggest some other insurance companies to an individual, which grants low premium policies in spite of these risk factors. In that case, a person needs to verify the credibility of that company before making any decision.

Steps for Lower Life Insurance Premiums:

Now, after acquiring the life insurance policy, if people improve their health substantially, it is important to alert the insurance firms, to lower the premium amount. Insurance agencies then conduct another complete medical check up of the individual and lower the premium amount.

Thus, people need to consider all these factors, if they want to reduce the amount of typical life insurance premiums. You can see how much you might pay with a free life insurance quote which you can get by using the following resources.

Insurance Companies and Universal Health Care

Insurance companies serve a very important function in our society. The purpose of insurance is to share risk. Risk is the amount of economic loss that someone is willing to assume in an activity. For instance, a bank would not loan money for the purpose of buying a house, unless the house was protected against losses such as fire, wind and other perils. That protection is provided by a Homeowner’s policy.

A loan to purchase an automobile would not be available unless the car was insured for losses by theft or collision. That protection is provided by an auto policy.

Health insurance is a policy that shares the risk of losses caused by injuries or illness. A share of the risk is assumed by the individual through a deductible or co-pay. In-other-words, if someone visits the doctor, that individual may be required to pay the first $15 or $20 of the visit. The health insurance company assumes the risk of the remainder of the cost.

That shared risk comes about through an exchange of ‘consideration’. Consideration is value. The insured pays a premium in exchange for the promise of the insurance company to pay certain costs associated with the insured’s health care. Which brings us to the controversy surrounding the government’s efforts to institute what some call universal health care.

No matter what side of the argument you are on, in favor or against universal health care, one issue has been settled. President Obama stated publicly that it is impossible to insure the ‘uninsured’ without additional costs. So, the idea that this will be a ‘deficit neutral’ policy has been debunked by the administration itself. Either taxes go up to pay for the program, or health care will have to be rationed to keep costs neutral, or bring them down.

In response to the public out-cry about a government health care program, the administration has called the insurance companies villains. After all, insurance companies exclude preexisting conditions for some period of time when an individual enrolls (however that is not always the case with group policies), and insurance companies are making a ‘profit’.

PreExsiting Conditions

Think about the concept of risk and preexisting conditions. An individual has a home that has been damaged by fire. Would a homeowner’s insurance company now write a policy that would cover the repairs to home caused by the preexisting fire? Of course not! That is not shared risk, that is bad business.

An individual has a preexisting health condition, say diabetes. Purchasing a policy that would exclude the treatment for diabetes for a limited period of time (usually two years), now results in a shared risk. The health insurance company will cover the person for other perils, and if that individual pays the premiums over time, that exclusion regarding the preexisting condition is then dropped.

Is it possible for the government to insure everyone in the United States and force insurance companies to provide policies without regard to preexisting conditions? It is possible, but not without driving the cost of health-care way up. After all, the money to pay the doctors and hospitals have to come from somewhere and President Obama stated that ‘We are out of money’. Since the government doesn’t earn money, its only source of revenue is taxes.

Profit

Insurance companies are being cast as the bad guy since companies make a profit. Which do you prefer, companies that are well run that make a profit, or a company like General Motors that required billions of dollars of taxpayer money to bail the company out? A profit is what allows companies to expand services and provide jobs. Companies that fail to make a profit, go out-of-business.

The government not only fails to make a profit, as a well run business entity should, it runs at a deficit. The latest example is Cash for Clunkers. Not only was taxpayer money used to subsidize auto sales, now car dealers are complaining that the government is not sending the checks for the Clunkers that were promised. It appears that many buyers will have lost their old cars and now face repossession of the new cars purchased since the money for the program did not actually exist.

This does not bode well for a government run health care system.

Tort Reform

Doctors and hospitals must practice defensive medicine. People will sue for anything. Tort lawyers use a ‘shot-gun’ approach when filing a malpractice lawsuit. All doctors, nurses, technicians and hospitals involved in a case are named as a defendant, whether that party had any actual responsibility for the claimed injury and damage.

We need a loser pay system, which provides that anyone who brings a lawsuit and loses, is required to pay the other side’s attorney fees and expenses. That would do away with most frivolous lawsuits and bring the costs of health care down.

Big Government Solution

Government should be required to live within its means. It does not, and the government, not insurance companies, is the villain in this scenario.

The founding fathers did not foresee a large, powerful centralized government. That is what was the war of independence against England was all about. The US Constitution delegated specific powers to the Federal Government, and it does not specify taking over any private sector industry.

Medicare and Medicaid are government health care programs on the verge of collapse. Even President Obama admits Medicare cannot be sustained. No program can be sustained when it runs at a deficit and all government programs run at a deficit.

Universal Health Care will run at a deficit from day one and that is just bad business.

More Fallout From Obamacare, Fewer Insurance Companies and Less Choice

We have to pass the bill so you can find out what is in it – Nancy Pelosi

Principal Financial Quits Writing Health-Care Policies

One of my harshest criticisms of Obamacare was the secretive manner in which it was written. Drafted behind closed doors by congressional staffers and lobbyists, Pelosi, Reid and Obama did not make the bill available for review before passage. The ability to deliver votes or large campaign contributions determined who had input into the bill.

Large insurance companies were one such pressure group, along with trade unions, allowed to influence the actual wording of the legislation. Although large insurance companies are motivated by profit and not the health of their patients, no one can accuse them of stupidity. A simple number these companies surreptitiously managed to slip in the bill will simultaneously guarantee their profits and destroy their competition. The article referenced is the first example of one such deception.

Hidden the 2000 pages of the health care bill is the requirement that 80-85% of health care premiums be spent of patients for actual health care. For those ignorant about the functioning of insurance companies, (Congress, Obama, the national press and the populace), such a number seems quite reasonable. It keeps those greedy insurance companies from taking too much of the money for themselves, and guarantees money for patients. In actuality, this numerical requirement will limit choice, increase costs, and insure the dominance of the legacy insurance companies.

Paying health care claims involved fixed and variable costs. These fixed costs include complex computer and software systems to deal with the arcane medicare rules prescribed by the government. Once these systems are installed, scaling them to larger operations is less expensive. Hence, as insurance companies get larger, their fixed costs become a smaller percentage of overall expenditures, which is common in many industries.

Meeting the 80% ratio is therefore far easier for larger than smaller companies, and will be virtually impossible for new start-up insurance companies. I think the 80% number was not just pulled out of the air, but probably represents the ratio already being spent by Anthem, Aetna, United Health, and the other large companies.

So in one stroke of the pen, large insurance companies have been able to force out smaller companies, eliminate the possibility of new competition and assure themselves of a 15-20% profit margin. I would say Insurance companies campaign donations were money well spent. The outcomes for the rest of us will be fewer choices, little innovation, lack of competition, and further centralization of power in the hands of a few large corporations.

The secretive manner in which Obamacare was written insures more deceptions remain to be discovered. Who knows what other pressure groups and lobbyists have slipped into the bill to protect their interests at the expense of the American people? I will not be surprised, nor am I optimistic.  

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