Your life insurance premiums are based on the probability of people like you dying. Most people fall into the “standard” category. Premiums vary by age, gender and smoking status.
If you undertake activities which increase your risk of meeting your maker too soon, the insurance company will charge you more, or exclude death from that cause.
Otherwise, you’d be underpaying which means the safer risks would be subsidizing you by paying more. They’d rather not.
When completing your application for insurance, be sure to answer the questions accurately. Besides being asked about the activities you currently undertake, you’ll be asked about activities you are planning to start. For instance, if you are buying life insurance because you want to start racing cars, you’re a bigger risk than non-racers.
Thinking about starting a risky activity isn’t the same as having concrete plans. Read the questions carefully and answer them as posed. You are not obligated to provide additional information but you are obligated to provide the information requested.
Here are some activities areas which concern insurance companies. This list is from BMO Life:
- Flying as a pilot, student pilot or crew member (excludes passengers)
- Motor vehicle racing
- Motor boat racing
- Scuba diving or skin diving
- Hang gliding
- Ultralight flying
- Hot air ballooning
- Rock climbing
- Traveling outside Canada or the U.S. for business or pleasure
If you participate in these activities, you’re usually asked to provide additional information in a questionnaire to help the underwriters assess the risk. You must disclose similar activities even if they aren’t mentioned by name. Otherwise, you risk having your life insurance cancelled for fraud. That’s not fair to your beneficiaries.
Tip: If the list makes your life look boring in comparison, you might want to start some of the activities. Wait until you’re insured before deciding!
What to do
Companies vary in how they treat different activities. Before you apply for coverage, have your advisor ask different insurance companies how they would assess you, without revealing your identity. This way you can apply to the right company the first time, without a warning flag on your insurance record.
If you stop a risky activity after you have life insurance, you may be able to get a reduction in your premiums. To find out more, contact the insurance company directly or through your advisor.
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