The Price You Pay
Even minor health risks can drive up the cost of life insurance
By KELLY K. SPORS
Staff Reporter of THE WALL STREET JOURNAL
How much is poor health costing you?
While much has been said about the toll that overeating, weight gain and lack of exercise can take on your health, many people don’t think about the impact on their pocketbooks.
But insurance companies do. Life insurers penalize people with poor health and bad habits by adding hefty surcharges for various problems linked to an unhealthy lifestyle. Just as you’ll pay higher premiums if you fly planes or scuba dive, you’ll pay extra for risky health. For the unhealthiest, the added cost can reach tens of thousands of dollars over the course of a 10- or 20-year policy.
Though it isn’t surprising that certain ailments, like cancer, diabetes or heart problems, may drastically boost rates, insurers also pay attention to more subtle health differences among people who don’t show any obvious signs of illness.
Life-insurance actuaries use health data and previous claims experience to figure out how different risks affect life expectancy, and they know that even minor health risks such as high blood pressure can shave years off a person’s life span. “We don’t try to predict results for a given individual,” says Dean Way, a senior actuary for Allstate Corp. “We look at broad groups with similar life characteristics.”
Here’s a look at how an unhealthy lifestyle can end up costing you extra money.
Smoking
Some health risks and bad habits are consistently pricier than others, and smoking tops the list. A healthy 43-year-old male who weighs 180 pounds, doesn’t smoke, and doesn’t have any major health or lifestyle risks can expect to pay a $24 to $35 monthly premium for a 20-year, $200,000 life insurance policy, according to ehealthinsurance.com, an online insurance broker.
But if that same man smokes, his premiums would generally be two to three times as high as normal rates, or as much as around $90 or $110 a month. Over the 20-year policy, he’d pay about $17,000 extra for his habit, if premiums stay level.
Even someone who quits smoking has to pay for his sins for a while. If you quit smoking within the past year, you’re usually still classified as a smoker, in terms of insurance rates. Premiums typically go down after various periods of abstinence from cigarettes. Some companies reduce premiums year by year up to five years and then finally give the former smoker a nonsmoking policy rate.
Obesity
Obesity, measured by life insurers using the body-mass index, usually begins to affect premiums when a person reaches more than 25% to 30% over normal weight, says Paul Graham, chief actuary for the American Council of Life Insurers.
Somebody who’s extremely overweight, or morbidly obese, can pay double or triple normal premiums, as smokers do. A seriously overweight person may even be uninsurable. Usually anyone with a body-mass index over 40 is considered extremely obese. “Being overweight is a precursor” to other health ailments, Mr. Graham says.
But determining just how overweight a person is can be difficult for an insurance company, says Kenneth Manton, research director of the Center for Demographic Studies at Duke University. Mr. Manton, who researches how health factors affect aging, says the standard measures of obesity such as body-mass index and weight don’t always accurately indicate risk. A 250-pound man may have lots of muscular weight, which isn’t nearly as detrimental as a 200-pound man with massive amounts of fat.
Also, Mr. Manton adds, predicting life expectancy based on weight is difficult because many cancer patients and other terminally ill people lose weight.
“You can be low body weight and be unhealthy,” Mr. Manton says. “It’s better to be a little overweight than not weigh enough.”
Blood Pressure
High blood pressure alone, if it’s well managed, doesn’t necessarily increase a person’s insurance rates. But adding another risk factor, such as being overweight, can make a huge difference in both your health and premiums.
For instance, a 30-year-old woman with a body-mass index of 35 would pay $258 a year, or $21.50 a month, for a 30-year, $100,000 policy from Allstate. But if she also has high blood pressure, she’d pay $441 a year, or $36.75 a month, for the same policy. That’s a $5,490 difference over the 30 years – if the rates stayed level. Some policies guarantee level rates for 10 years, but reserve the right to adjust them according to age and health after that.
Cholesterol
High cholesterol levels can plump up life-insurance premiums, too. Medical experts typically consider desirable cholesterol levels to be anything below 200. Levels above 240 are high and increase the chance of developing heart disease. In terms of life insurance, most people won’t see their premiums rise until cholesterol tops 220, sometimes even higher.
A healthy 50-year-old man with cholesterol below 200 can get a 10-year, $200,000 policy for $25.76 a month, according to Insure.com, a Web site that gives insurance quotes. If his cholesterol level is 230, the best he could get is $27.50, or nearly 7% more. If his cholesterol is 260, the best offer is $32.73 a month, and he’d spend 27% more than the healthy man. That’s about $836 more over the 10 years. A cholesterol level over 300 would mean he’d have to pay $40 to $50 a month – or, at the high end of that range, roughly double the healthy man’s cost.
High cholesterol is even costlier when it’s coupled with other health risks such as high blood pressure and obesity, which greatly boost rates of heart disease and the likelihood of suffering a heart attack. A 250-pound, 50-year-old man with high blood pressure and 260 cholesterol would pay at least $47.17 each month, Insure.com says. That’s $2,569 more than a healthy man over 10 years.
Diabetes
Type II diabetes, triggered by years of being overweight and a lack of exercise, puts you at risk for a number of additional health problems as well as higher insurance premiums. Typically, premiums at least double with Type II diabetes, depending on how long ago the disease was diagnosed. But once a person develops diabetes, he or she can be rewarded with better premiums if the disease is kept under control.
“The caveats are age of diagnosis and how well your blood sugar is controlled,” says Bob Transon, Allstate’s assistant vice president in product management.
It’s important to know that all companies are different when it comes to putting a price tag on health risks. The biggest penalties are paid by people who have a combination of risk factors. But just because one insurance company penalizes you for having high blood pressure or cholesterol doesn’t mean they all will, so it pays to shop around. Some companies use a business model that allows them to insure people that other firms might turn away.
After a policy is underwritten, it can still pay to improve your health. People who take drugs to lower blood pressure and cholesterol, for example, can often get their premiums reduced with medical proof.
And even if your health numbers look pretty good, it still pays to improve. Most insurance companies even differentiate between people with normal or average health and “outstandingly” healthy people, says Al Klein, senior consultant for Tillinghast-Towers Perrin, an actuarial consulting firm in Chicago.
If you fall into this “preferred” premium group, you could pocket savings of as much as 50% on your monthly premiums. “If you’re a completely healthy person,” notes Mr. Klein, “you’ll get a much better rate than someone who’s just somewhat healthy.”
– Ms. Spors, a staff reporter for The Wall Street Journal, is based in South Brunswick, N.J.
Updated January 26, 2004
