When insurers calculate the premiums for a life insurance policy, a young individual in relatively good health is expected to have a long lifespan, which lowers the premiums. A person with a short life expectancy presents a higher risk for the insurance company, which raises the premiums, according to Investopedia.
Life expectancy also affects how much the insurance company pays out to the insured or to his beneficiary. Some types of annuities, for example, take into consideration both the insured and his beneficiary's life expectancies to determine the annuity payment amounts. Age, height, weight, a history of medical problems and gender are some of the factors that influence life expectancy. Parents can choose to purchase life insurance for their young children to give their children a head start with lower premiums that are less affected by life expectancy, asserts Investopedia. Life expectancy is considered based on rate classes, which are standard, preferred and super-preferred, according to Fidelity. Super-preferred individuals have exceptional health and present the lowest risk.
As advances in medical technology are made and people begin to live longer, life insurance companies may lower premiums, positively affecting consumers and the insurance companies, states Bankrate. The longer the insured individual lives, the lower the return on investment compared to the contributions for the insured.