HOW WE CALCULATE PREMIUMS

To those you leave behind, your life is priceless. In the insurance industry we have to take a more calculated approach in working out the premiums you will pay and the payout your family will receive. It’s worth knowing how it works so you can satisfy yourself you’re getting value for money.

Premiums are based on a number of factors.


What do you think you’re worth?
How much do you want to insure your life for? Quite simply, the bigger the payout you want for your family when you die, the higher your premiums will be.


Mortality – a dead cert
Life insurance is not like car insurance. Not every driver has an accident, but everyone dies. The big question we have to ask is how likely is the death of any particular person. So we take into account personal factors such as health status, age, gender, and whether you smoke. Then we apply certain basic mortality statistics, for example, women tend to live longer than men, young people tend to be healthier than elderly people, smoking causes cancer. Thus the lowest premiums would typically be paid by a young female non-smoker.


Expenses and commissions
The premium you pay also includes an amount to cover business expenses – establishing and administering your policy. If you were to use a broker, the premium would also include their commission. It’s important to know that because you’re coming directly to us, we don’t need to work any broker commissions into your premiums.


Interest earned through investments
Some of your premium is invested by insurance companies. The interest it earns helps to reduce the premium you pay.

So premiums are calculated on the basis of this equation:

Premium = mortality + expenses and commissions – interest earned

Premium = morbidity + expenses and commissions – interest earned