Insurance is made possible by a large number of people sharing a common risk pool. The Insurer collects premiums, which they invest and hold in order to pay out claims.
Every member of the pool has to contribute in a fair way to ensure that the funds are not depleted by too low receipts.
Over decades the insurers’ actuaries have collected statistics about the factors that would cause risk of mortality to differ between people. Some of these are smoking, obesity and alcohol abuse.
This specific examples causes medical conditions to arise, and also accelerates and magnifies the scope of others. As an example, smoking can cause lung cancer, as well as worsen pneumonia. Obesity can cause heart attacks, as well as cause and worsen joint problems. Alcohol can destroy the liver, as well as heighten the odds of accidental death or injury.
The insurer therefore has to charge a loading on the premium to factor in the increased risk. As one gets older the penalty becomes more severe, because the risk increases with age. Ultimately these penalty premiums can negatively impact one’s lifestyle, as the amount of life cover can effectively cost more than triple that of an unloaded premium. You would either than have to pay much more, or lower the cover available for you and/or your dependents.
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