Do you enjoy scuba diving? How much do you love those flying lessons? Feel like going bungee jumping this weekend? If these questions fill you with a longing to indulge in your favorite extreme sport, beware—that sport or dangerous hobby might affect your life insurance premiums.
When underwriters review your health, hobbies, and history, they determine how much risk you pose to the insurance company. The more mortality risk you and your lifestyle present, the higher your premiums will be. It is essential also to consider that the threat you pose to the insurance company is not strictly dependent on your current health or medical history. Any risky hobbies (also called avocations) you enjoy regularly will expose the insurance company to a higher risk of your death and subsequent death benefit payout.
Insurance companies know they’ll sometimes have to pay out death benefits on policyholders who have paid very little in terms of premium from an unexpected death caused by an unexpected illness or accident. A dangerous hobby poses a predictable threat of death, supported by historical data, allowing the insurance company to quantify the risk and attach a dollar value to it.
Depending on the type of hobbies you participate in, you may find the underwriter of your insurance policy, including an additional premium to subjugate the risk your pursuit poses. That additional premium allows the insurance company to lessen the financial burden that your added risk creates.
There are many different ways that an insurance company can increase your premiums.
- Flat Extra Premium: An extra flat premium is a flat dollar amount added to your monthly premiums, and that amount is fixed and included in your tips for the life of your policy.
- Table Rating: A table rating is an additional percentage of the monthly premium you will be expected to pay. Again, this amount is fixed for the life of your policy.
- Temporary Flat Extra: Like the extra flat premium, the temporary flat extra adds a fee to your premium but, in this case, only for a certain period. A quick flat difference might be used for someone taking flying lessons or another dangerous activity with a known end date.
Another option is to accept exclusion from coverage for deaths caused by or about that hobby. This could allow you to enjoy regular premiums with no additional charges but does create the unease of having a dangerous sport go uncovered. A supplemental accidental death policy may be your solution.
Be sure to disclose your risky hobby with your Brian Gruss, so he can help you determine the best course of action.