You expect a pre-existing health issue, lugging around excess weight and/or smoking to have life insurance implications – making carriers think twice about offering you coverage. After all, those things can shorten your life span.
But that's not all you might do that has life insurance carriers concerned they’ll have to pay a claim. Your job, and in some instances your hobbies, can have life insurance carriers thinking twice about selling you a policy or offering you affordable rates.
It All Comes Down to Risk
Life insurance companies rate applicants based on the amount of risk predicted for them. The less of a risk you are, the lower your life insurance premiums. So living a safe, simple life can be good for your wallet.
However, if there’s part of your life that makes you more likely to die earlier than others of your gender in your age bracket, region, etc., you may be categorized as “high risk.” And that could lead to paying as much as four times more (annually) for life insurance.
When an insurance company evaluates risk during an application review process, they determine the risk based primarily on health factors, says Richard Sturm, a financial adviser, educator and public speaker in Seal Beach, CA, with over 25 years of experience.
Non-health–related factors like vocation are also evaluated. Many jobs that might seem dangerous aren’t necessarily a concern for all insurance companies. “For example, fire fighters and law enforcement professionals can receive the same rating that an office worker might, depending on the life insurance company,” says Sturm.
However other jobs, like being a hazardous materials handler, might lock you out of a life insurance policy altogether or have you paying higher premiums than someone with a job deemed “safer”. Helicopter pilots and private pilots are two other professions typically classified as high risk, says Liran Hirschkorn, an independent insurance agent in New York City.
“Ironically, life insurance companies do not rate commercial airline pilots as high risk,” says Hirschkorn. “Commercial planes are considered safer than private planes, and insurers assume pilots have 1000’s of hours flying experience, so there is little added risk.”
Even “safe” jobs can trigger a high risk rating and increase your premium, says Hirschkorn.
“If your job requires you to travel internationally to countries considered high risk, you may face a higher rate. I recently had a client living in Texas who traveled to off-shore oil drilling locations off the coast of Africa which resulted in an added cost,” adds Hirschkorn.
Other occupations most insurance companies consider high risk are also those the U.S. Bureau of Statistics says carry the highest rates of job-related accidents and deaths. They include:
- Underground miners.
- Agriculture and forestry. This typically pertains to the logging industry, however, it’s also applicable to farmers and ranchers in some regions.
- Construction workers. Traditional construction (building homes) is rarely classified as high risk. But work that involves structural steel construction or working on a highway construction crew is designated as high risk and carries a higher price tag for life insurance.
- Off shore commercial fisherman. Practically all who work in a small boat are rated high risk. Size isn’t always a factor as some big boat workers like crab fishermen are also labeled high risk. Stick to fishing in-shore and you’re OK.
Hobbies Can Also Raise Costs
“Insurance companies might deny insurance for individual scuba divers, recreational pilots, mountain climbers, race car drivers or hang gliders. Some insurance companies may insure the activity, but raise the premium of the policy. Others might exclude the activity altogether and not pay a related claim,” says Sturm. Just having a pilot’s license could raise your rates, according to Hirschkorn.
If your job or hobby trigger a high risk rating, Hirschkorn says your premiums could run $2 to $5 more per thousand dollars of coverage depending on the carrier.
But the devil is often in the details.
Hirschkorn says some life insurance companies may offer a more affordable rate based on the extent of your participation in the hobby.
“A scuba diver who dives less than 100 feet, and less than 10 times per year may still qualify for a non-high risk rate. However dive more than that and the best rates won’t be offered to you,” he says.
In other cases, insurance companies might charge a "Flat Extra." So if you skydive, you may pay an additional $2.50 per $1,000 of coverage annually for the added risk. For a $500,000 life insurance policy, that would tack on an additional $1,250 on top of the standard annual premium.
Reducing the Risk to Your Budget
You’re not necessarily doomed to exorbitant life insurance rates just because your job is risky or you’re a weekend thrill-seeker.
Hirschkorn says you may be able to lower your rates by requesting an exclusion related to your job or hobby. In that instance, a claim resulting from your job or hobby listed on the exclusion will not be covered. For instance, a scuba diver could request a diving exclusion and any claim related to scuba diving would not be covered.
The Bottom Line
Because insurance companies each have their own criteria for rating risk related to jobs or hobbies, Sturm suggests working with an insurance broker who has access to many carriers versus a captive agent who is employed by a specific insurance company and only has access to that carrier’s rates and products. “You want to work with an insurance broker who demonstrates a good working knowledge of various insurance companies’ guidelines concerning risky vocations and hobbies,” he says. Also remember to ask about specific exclusions, and to disclose the frequency with which you participate in dangerous hobbies.