Do you enjoy scuba diving? How much do you love those flying lessons? Feel like going bungee jumping this weekend? If these questions fill you with a longing to go indulge in your favorite extreme sport, beware-that sport might just affect your life insurance premiums.
When underwriters review your health, hobbies and history, they are determining how much risk you pose to the insurance company. The more mortality risk you and your lifestyle present, the higher your premiums will be. It is important to also consider that the risk you pose to the insurance company is not strictly dependent on your current health or medical history. Any risky hobbies (also called avocations) you enjoy on a regular basis will also expose the insurance company to a higher risk of your death and subsequent death benefit payout.
Insurance companies know they’ll sometimes have to pay out death benefits on policyholders who have paid in very little in terms of premium from an unpredictable death caused by an unexpected illness or accident. A dangerous hobby can increase this risk.
Typical avocations that will increase premiums include scuba diving, sky diving, amateur piloting of an air craft, rock climbing and any other avocations that the company deems risky.
For disability insurance, these types of avocations are typically excluded. For example, if you like to rock climb and currently rock climb at the time of your application, chances are you will have a rock climbing exclusion on your policy. This means that everything will be covered on your disability insurance policy except if you were to become disabled while rock climbing.
Life insurance policies do not offer exclusions. They typically will increase the premiums with a rating. Depending on your situation, the rating can be mild to severe.
Keep in mind, the company can only ask about previous and current avocations on the application. Once you have your policy in place, they cannot implement a rating or exclusion (in the case of disability insurance) if you take up a risky avocation in the future.