How does the insurance company determine my premium?

Part of a company’s financial strength has to do with how a company establishes prices for its products and how it manages business risk. For example, insurance companies are required to set aside funds to ensure that they always have money to pay their clients’ claims. New York Life chooses to go above and beyond the minimum requirements, taking extra steps to safeguard our financial strength over the long term.

Insurance companies price their term insurance based on what they expect policy owners to do, well into the future. For example, over time some policy owners may convert to permanent coverage, some may drop coverage, and some may keep their term coverage in place. Most companies offer “level premium” term policies where the premiums are guaranteed to stay the same for a certain number of years; however, after the level period is over, the premiums go up each year— sometimes dramatically. Companies will differ in their assumption of how many policy owners will continue their term coverage after the level premium period ends, even when premiums go higher each year. Because there is a high degree of uncertainty around what policyholders actually will do—particularly 10 to 20 years in the future—it can be difficult to predict with any certainty.

Premium rates are typically based on factors such as age, gender, height, weight, health status (including whether or not you use tobacco), and if you participate in high-risk activities or occupations.