Does Your Location Affect Your Life Insurance Rates?
Written By Cameron McDowell
Sep 15, 2021
6 mins read
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How Does Your Location Affect Your Life Insurance Rates?
Anybody who’s requested life insurance quotes knows that policy rates are determined by factors like your body mass index, age, health, driving record, and other relevant risk considerations. But what about less obvious factors like your neighborhood or state?
In this guide, we discuss whether a person’s permanent address and geographical location can impact their life insurance premiums, how it can happen, and how state laws influence an insurance plan’s implementation.
Do Life Insurance Companies Charge More Based On Location?
Buying a life insurance policy can be a complicated process. Applicants have to answer numerous questions about their health, family history, lifestyle, and provide any relevant information during the application process – all in the name of determining how “risky” they are as an insurance candidate.
But do factors like your geographical location have any bearing on the price of buying a life policy? The answer is yes, but not directly.
The price of getting a life policy comes down to a person’s mortality, which is the likelihood that they’re going to pass away early. Insurers generally determine a user’s mortality based on medical exam results as well as the health information from your doctor. Given this, geographical location doesn’t impact your mortality in the same way medical records will, but some insurance providers do consider it when deciding on your insurance rate.
The main way policyholders are affected by their geographical location is through state legislation. That’s because life plans are regulated on a state level. For example, a life policy from Nevada may not necessarily work the same way as a plan from New York, and so on.
Here’s the truth: it’s relatively uncommon for insurance providers to adjust your premiums based on your location, but it can happen. Some companies may adjust a quoted price based on whether their surroundings directly impact their applicants’ health.
This section discusses a few considerations that may affect how much money you’ll have to put down for a policy.
Home And Neighborhood Age
While your address isn’t the most significant factor when your life insurance company decides on your premiums, it can affect the perceived risk of insuring you. For example, living in old neighborhoods or antique houses usually means you’ll be dealing with outdated wiring and plumbing systems. That means you’re more likely to die in a fire or flood when something goes awry.
Proximity To Other Buildings
One of the questions your insurer might ask is your home’s proximity to other buildings. That’s because densely-packed residential areas are considered higher risk than well-spaced suburban towns. That’s mostly because of the likelihood of fire spreading between buildings. Folks in big cities like New York or Los Angeles may have to put down more money on premium payments to counterbalance their metropolitan zip codes.
Fire Services And Crime Rate
Like most homeowners, life insurance companies believe that safety is key. That’s why some insurers may adjust life insurance premiums based on an applicant’s local crime rate and how fire-safe their location is. If an insurance applicant lives in an area known for vandalism or robbery, they may have to contend with higher premiums.
Do note that if your life insurance company is concerned about local crime safety, purchasing a house surveillance system can help you lock down a lower price.
Traffic Patterns And Car Density
One of the main questions life insurance companies ask is whether you have a history of any major car accidents, traffic violations, or general citations in your driving records.
While this is mostly in your control, some people may live in higher risk areas with poor city planning, high-density traffic, or even faulty stoplights. If that’s the case, then they’re more likely to have been in a car accident or two.
Luckily, things like these aren’t deal-breakers, but they may prompt your insurance company to take a second look at your driving record and increase your premiums.
When discussing risk assessment for an insurance policy, most people generally don’t think the likelihood of natural disasters matters too much. However, folks that live in states prone to natural disasters may find themselves paying more for a life policy.
For example, Californian residents are likely to experience wildfires, while New York natives may come head-to-head with the effects of inland flooding more often – thus, increasing premiums for these applicants.
How State Laws Impact Life Insurance
State legislation is the primary governing body when it comes to life insurance policies and their owners. It can dictate the protections a policyholder is entitled to, how traveling can impact your health or risk classification, how your death benefit can be paid out, and whether your assets are considered joint property between you and a spouse.
Policyholder Protection Laws
Some of the first things a new policyholder needs to know about their life insurance are the state-determined protections available to them. Specifically, applicants may want to ask their insurance agents about the following:
Late payment grace period: How long people may pay their monthly contributions once the due date has passed. Life plans cannot be terminated during the grace period.
Free look period: The window when policyholders can rescind their policies and receive refunds for initial or monthly payments.
State guarantee: When the state guarantees policyholders’ payouts if their insurers are declared bankrupt or insolvent.
While most applicants won’t experience any significant price changes because of recent travel, some states may give them a lower health rating based on a few considerations.
A person’s frequency of travel, length of stay, and destination all play a large part in their eligibility for a life plan or quoted price. The more extensively you travel, the more at risk you are of getting injured or contracting an illness.
Given this, if you live in California, Connecticut, Colorado, Illinois, Maryland, Massachusetts, New York, Oklahoma, or Washington, insurers are prohibited from using your travel history as grounds for higher monthly payments.
Laws Regarding Beneficiaries
Local legislation can also determine how death benefits are paid out and who can legally be named a beneficiary. That’s because some areas require that all beneficiaries are legal adults before they can receive an insurance payout. Otherwise, the insurance proceeds may get tied up in court, and your beneficiary may not be able to access the funds when they need them.
With this in mind, most states consider all individuals over 18 to be legal adults. However, there are some exceptions – Alabama and Nebraska require beneficiaries to be at least 19 years of age, while Mississippi locals must be above 21.
Community Property Laws
Some states have community property laws, which view all assets and income as joint property between two spouses. Because life insurance proceeds are designed to replace a person’s income after they pass away, any payouts received are considered community property.
So how does this impact the insurance application process?
If you live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin, you’re legally required to name your spouse as your policy’s beneficiary. However, if your spouse signs off on naming someone else, like a relative or business partner, then you may be able to choose another beneficiary.
Life insurance plans are directly influenced by various considerations, from your medical information to your credit score. However, sometimes seemingly unrelated circumstances like your location can also impact monthly payments and overall cost.
That’s why we recommend working with financial experts when trying to understand how area-specific legislation affects your insurance policy. Contact us at Wesley LLC to find out how we can help you!