You know you need to drop some pounds. But did you know that losing weight can also fatten your pocketbook?
If you lose a significant amount of weight, and keep the pounds off, you could reduce your annual life-insurance premium. That’s because your premium is determined by the health rating for which you qualify. The higher your health rating, the less likely you are to need costly medical care, and the less risk you present to an insurer.
When you pose a lower risk, insurers charge you a lower premium.
Your weight is just one factor that determines your health rating. It’s not the most important factor, but maintaining a healthier weight can still make a difference when insurers are calculating the cost of your life-insurance policy.
“Your savings depend on the severity of your weight loss,” says Jason Silverberg, vice president of financial planning for Rockville, Md.-based Financial Advantage Associates. “Smoking is the real killer when it comes to your life-insurance premium. But losing weight can drop your premiums. Generally, depending on other factors, you can save about $50 a month by losing a significant amount of weight.”
How insurers compile a picture of your health
Christopher Huntley, an insurance agent with Huntley Wealth & Insurance Services in San Diego, says insurers will compile an overall picture of your health when determining your premium.
This picture will include your age, weight, whether you smoke, how much alcohol you consume on a regular basis, your occupation and whether your family has a history of certain illnesses.
Insurers then put applicants into a specific health rating. The difference in premiums from a higher rating to a lower one can be significant.
"Each rate class can mean either an increase or decrease in the premium they pay by as much as 25 percent," Huntley says.
Sudden weight loss? You'll get only partial credit
Sudden weight drops, though, aren't worth quite as much, Huntley says. Insurers understand that when people drop a significant amount of weight, they are likely to put much of that weight back on as soon as they go off their diets. If you lose a significant amount of weight in a year, your insurance company will most likely give you credit for only half of the weight you've actually dropped, Huntley says.
For instance, if you weighed 300 pounds but lost 50 pounds in one year, your insurer will probably rate you as though you weigh 275 pounds instead of 250.
"They want to be sure that you've kept it off for a full year before giving you full credit for the weight loss," Huntley says.
The good news? You can always request a re-evaluation from your insurer if you maintain your lower weight for more than a year. If you have, you can qualify for your full weight loss.
How much can you save by losing weight? Silverberg gives this example: Say a 40-year-old male is applying for $1 million worth of life insurance in a 20-year term policy. If that male is a smoker who stands 5-feet-10-inches tall and weighs 265 pounds, he can expect to pay $3,505 a year for his policy.
If that same male loses 65 pounds to get down to a weight of 200 pounds, he will pay $2,905 for his yearly premium. That's a savings of $600 a year, or $50 a month.
How losing weight can lead to an better health rating
Don't be discouraged if you're overweight when you first apply for your life-insurance policy. Once you drop the pounds, you can ask for a new health exam. If you are in better health -- meaning you've dropped some serious pounds -- you might qualify for a lower premium, says Jason Tate, owner of Jason Tate Financial Counseling in Murfreesboro, Tenn.
Tate says life insurers rate applicants on a three-tiered scale: preferred, standard and sub-standard. If you're a little overweight, the odds are -- if you don't smoke -- that you'll fall into the standard risk category.
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Losing enough weight and taking other healthy steps to get yourself to the preferred rating could save you as much as 30 percent to 40 percent on your premium, Tate says.
If you have lost weight, call your insurer to schedule a new physical exam. Know, though, that you are required to state whether you've lost more than 10 pounds in the last year. If you have, your insurer will not give you full credit for all of the pounds that you've dropped.
Don't be shy, though, about contacting your insurer again after a year has passed if you've kept the pounds away.
Says Tate, "It is very possible to lower your costs even after the policy has been in force."
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