Factors Affecting Your Premium

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Insurers need to understand who you are so that they can try and price your cover in proportion to your risk. When looking at the new or existing cover it is really important to speak with someone independent and objective to make sure your needs are matched correctly.

Life cover, disability and critical illness premiums are all based on your determined levels of risk. Some of these factors that affect our premiums we cannot change like our age, while other factors like smoking status we can change. Being aware of the influence we have over our premiums could be the difference between a lifetime of savings versus overpaying.

By highlighting and explaining these factors we hope that you will be able to save money, reduce your risk and best of all have peace of mind. Knowing that you are paying what you should for cover that you need is a great feeling.

Just in case you are not sure what an insurance premium is, Investopedia has a brief explanation over here.

The most common Risk Factors that affect your insurance premiums are:

  • Age
  • Gender
  • Occupation and income
  • Qualification
  • Health and Medical History
  • Smoking status
  • Lifestyle

Changes to any of these factors may have an impact on your existing policy. You need to let us know of changes in your life as it could lead to changes to your premium or worse your claim being rejected.

How does my AGE impact my premium?

Probably the most logical risk factor when determining risk is your age. The younger you are the longer the less likely you are to claim and more likely insurers are to receive premiums before paying a claim.

Although we have no influence over our age, we can choose the age we start with insurance products. Insurance is not an investment so starting early is not necessarily a benefit but for example, trying to get life cover at 55 is significantly more expensive than at 45.

Do not be afraid to review your products or ask an expert for a second opinion. We are doing it all the time.

How does GENDER impact my insurance premiums?

Gender plays a role in the insurance premium. Insurance providers use an approximate risk model which takes into account how long someone with a specific profile will be around. Research across numerous countries shows that on average women live nearly 5 years longer than men. There is also research showing that woman tend to take fewer risks and generally make safer decisions.

In terms of risk, this translates to women paying less.

How do my OCCUPATION and INCOME impact my insurance premium?

Your occupation and income give insight into your daily activities which has a significant impact on your risk rating. An electrician who is on their feet all day, climbing ladders, working with power tools and live wires, are at a much higher risk of injury and death when compared to a web designer. 

Occupation is a complex risk factor as insurers have risk tables within industries and occupations. You could be an electrician in a company where you do most of your work at a desk or workbench or you could be on ladders working with high voltage wires all day. These need to be evaluated differently. Your occupation and the occupation split is crucial to being rated correctly along with making sure your claim is paid. A financial planner should ask for more detail to determine your occupation risk. 

How do my QUALIFICATIONS impact my insurance premium?

There is data that shows a general link between the level of education and the decisions people tend to make. Statistically, individuals with tertiary education are considered less risky. It is worth mentioning here that your qualification, occupation and your income share a connection in risk ratings. 

You can still have an excellent risk rating without a qualification. If are desk-bound as a manager, earning a good salary, insurers will not factor in that you don’t have a matric. Similarly, you could be a doctor working as a research volunteer and earning next to nothing and still be on the top risk rate because of your qualification.

How does my HEALTH impact my insurance premiums?

Perhaps the biggest impact on your risk premiums is your health. This is a unique risk factor when compared to others as insurers may impose exclusions and loadings based on their findings.

As part of applying for risk cover, you will be asked several questions and you will likely be required to complete a medical exam. The health questions include family history questions which insurers use to screen potential risks.

The health exam includes assessing your height, weight, blood pressure and taking blood. From the blood test, they will look at cholesterol, smoking, liver and several other screen tests.  Based on your feedback and these results they may require further assessments. 

Some providers claim to do less medical underwriting than others but always read the fine print.

How does my SMOKING STATUS impact my insurance premiums?

A somewhat obvious factor that affects your premium. Smoking has been shown to lead to various health issues and a smoker’s insurance premium will be higher than a non-smoker. You can quit smoking and inform your insurer of this decision. The insurer may have a few hoops to just through but if they are satisfied that you have quit you will get a significant deduction on your premium.



The opposite is also crucial if you start smoking you need to check the fine print of your policy as you may be required to notify your insurer. Fail to do so may result in your claim one day being rejected.

How does my LIFESTYLE impact my premiums?

Are you an adventure seeker? Do your hobbies take your feet off the ground, head underwater or going faster than most humans can run?

If you enjoy activities like diving, flying, biking, hunting it is important to mention this when applying for cover as this may impact your insurance premium. There is a chance your premium is going to be higher than that of less risky individuals.

In summary insurers are trying to understand who you are and they are trying to price the risk they are taking on. When taking our new cover it is really important to speak with someone independent and objective to insure that you are insure correctly.

If you have a policy we cannot stress enough how important it is to keep it updated. 

Get in touch 

Live Trust Grow Matter

The information provided is not intended to address the specific circumstances of an individual and is only for information purposes. Should you require financial advice please contact us info@growmatter.co.za

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