A recent survey from LifeHappens and LIMRA, two insurance industry nonprofits, demonstrated that while most people know that factors such as your age, health and tobacco usage will be considered when purchasing life insurance, only 64% knew their family history can directly affect their premiums and the ability to be covered.
This means that, even if your health profile is pristine, if a family member has died at a relatively young age due to a potentially hereditary condition, your life insurance premiums could be significantly higher.
In our survey of premiums from 24 insurance companies, we found insurers tend to consider similar factors, both positive and negative, to determine the impact of family history on life insurance premiums. Yet the impact of any given factor is weighted differently by company. When it comes to family history, the key things an insurer will ask about are:
- At what age the family member was diagnosed and when they passed, if applicable
- The particular disease they were diagnosed with ("cancer" doesn’t work, the insurer will want to know what type)
- How the person was related to you (the largest impact is from direct siblings or parents)
Our research shows that a person who is in perfect health would pay premiums for term life insurance that are 41% higher, on average, should they have a parent who died before the age of 50 due to a potentially hereditary condition (when compared with someone who had no family medical history).
The impact of when your parent or sibling died
If a close family member died of a specific disease, the age at which this death occurred will be one of the most significant factors affecting your premiums. As you can see below, a parent who passed away at age 50, as opposed to 70 or later, would increase your annual premiums by about $200, from around $500 to $700 — or 41% on average.
Insurers classify applicants into different tiers of health risk depending upon several factors, including when a parent or sibling died, with each tier having a "cutoff" value — a level for that moves you to a lower tier — based upon one or multiple variables.
A person in the highest health tier is considered likely to live the longest, as they are in great shape with no personal history of a medical condition, high blood pressure or high cholesterol. At lower health tiers, some health and other issues are accepted — and premiums generally rise as a result. While there’s some price variation within a given tier, if you hit any of the qualifiers to jump to a lower tier health categorization, the premium impact tends to be significant.
When it comes to family history, a parent who died prior to age 60 or 70 typically defines the cutoff for insurers as to your health tier qualification. You can see this reflected in the data above as, on average, 15.3% of insurers in our analysis changed their health rating (and, therefore, premiums) based upon a parent dying at age 60, while 88.9% categorized an individual differently if a parent died at age 50. (Unfortunately, no break is accorded for the converse — as in having a parent who lived long past 70).
The impact of different diseases
While the age at which a family member passed has the greater impact, on average, insurers also consider what caused their premature death. The rationale here is that the specific disease or condition involved will affect your likelihood of dying from the same cause, since some conditions are more likely than others to pass on genetically.
When shopping for life insurance, an insurer will want to know exactly why a family member died early, and with some specificity; citing something broad (such as "cancer") likely won’t be sufficient. As you can see above, if a parent passed at age 50 due to a heart attack, average premiums are 7.7% higher (or $52.65 annually) than if they had passed from a stroke at the same age.
Similar to the way health tiers are impacted by the age at which a parent died, the reason for their death may move an individual into a higher or lower health tier as well. Some of the conditions that could impact your life insurance premiums if you have a family history are:
- Cancer (breast, prostate, colon, ovarian and other cancers)
- Heart disease or heart attack
- Cerebrovascular disease (such as a stroke)
- Kidney disease
Given these conditions are quite common (together, heart disease, cerebrovascular disease and cancer made up 51% of deaths in the United States in 2015, according to the CDC), it’s important to research and understand your family history before shopping for life insurance.
What to keep in mind when shopping for life insurance
If you’re considering purchasing life insurance, clearly it’s important to know if you have a family history of any conditions, and particularly to know if and when a direct relative died due to one. This can take some time and effort to research, but the potential effect on your premiums means it’s important to do so early.
In the event that you do have a relevant family medical history, you may want to purchase life insurance sooner rather than later, as the cost of a policy will only increase as you get older and potentially have health issues yourself, to compound risk and potentially further raise premiums or affect eligibility.
This doesn’t mean, however, that every person with a family history should go out and get coverage immediately; life insurance is typically a consideration only when you have financial dependents. As an example, if you consider that the average age a woman has her first child in the United States is 26.4 years old, even many young families should consider seeking coverage.
In addition, if you decide to purchase life insurance and have a family history, be sure to compare rates from multiple insurers in order to get the best price for the coverage you want. Independent insurance agents, as opposed to captive agents, represent multiple insurers and should be well-versed in how each evaluates potential customers, including for their medical history.
For example, if one of your parents died at age 65, the agent should be able to point you to an insurer that won’t change your health tier (as their cutoff is if a parent died at age 60). By contrast, a captive agent is tied to a single insurer and so would be unable to point you to a potentially cheaper competitor.
We sampled data from a set of 24 insurers for each scenario listed, looking at those that had a national presence. We worked with an independent third-party aggregator of rate calculations to retrieve sample premiums. If a single insurer offered multiple products, only one was sampled. All queries assumed the individual was a male non-smoker in perfect health. Policies were 20-year level terms with $500,000 in coverage, and we only considered insurers with at least an A- rating from A.M. Best.
As insurance rates vary according to age, we sampled data for individuals purchasing insurance at 20, 30, 40 and 50 years of age. In looking at family history broadly, we sampled data for three scenarios (parent died of a heart attack, parent died of prostate cancer and parent died of a stroke).