Have you ever seen Along Came Polly, the Ben Stiller and Jennifer Aniston rom-com? Stiller plays a neat-freak actuary who calculates risk for a living, and in classic rom-com fashion, it’s a shock that he falls for ex-classmate Aniston whose total disregard for safety rocks him to the core. She likes being free-spirited and helps him loosen up, inviting him to do more and think less.
If you’re anything like Polly, you, too, enjoy life on the edge. Perhaps you scuba dive, mountain climb, or jump out of planes. You probably do it because it’s fun, freeing, and, let’s face it, a little risky.
But did you know being a risk-taker can cost you? If you’re partaking in extreme sports like rock climbing or bungee jumping, you’re a riskier case than, say, someone whose idea of a happenin’ Friday night is a game or two of Mahjong. And because you’re a riskier case – regardless of your health condition or how many safety precautions you take – your life insurance rates might be more expensive. Many fans of extreme sports believe this is unfair – especially since they have to go through a lot of safety precautions before they can do anything – but it's important to understand why life insurance companies think this way.
Why am I considered a riskier case if I have an extreme hobby?
Simply put: because there’s a greater chance you’ll die of unnatural causes, like drowning, falling off a mountain, or propelling to the earth sans a parachute.
The higher the chance that you’ll die before your time – either because of a risky health condition or hobby – the higher your life insurance premiums will be.
But just because you enjoy a extreme sport or hobby doesn't mean your rates automatically go up. More on that in a second.
How do I disclose my extreme hobby to the insurance company?
Although each insurance company has a different application process, they all tend to ask similar questions on the application. When it comes to extracurricular activities, expect to answer questions about which hobbies you have or how often you perform the hobby. Different hobbies have different questions, though, so don’t be surprised if they also ask things like whether or not you’re doing it for pay or what kind of environment you’re in.
How is it priced?
When it comes to buying life insurance when you have extreme hobbies, there are two main components that you should know about – the base premium and the flat extra.
The base premium is the price you’re going to pay on rating alone, regardless of being deemed an at-risk client or not. Factors like age, health condition, current or past drug use, and whether or not you smoke cigarettes help identify your rating, and, ultimately how much you will pay to buy life insurance.
Flat extra costs are what are attached on top on the base premium, calculated as a dollar amount per thousand of coverage. For example, if you have $300,000 in coverage and the fee dollar amount is $2, your flat extra cost will be $600 annually. How? Because of good old-fashioned math. You take the dollar amount ($2.00) and multiply it by the per thousand of coverage (300 is the per thousand of coverage because $300,000 divded by 1,000 is 300). $2 times 300 equals $600 which is your flat extra cost.
Every hobby has its own pricing table and fees, and every life insurance company has their own pricing table for every hobby. For example, if you enjoy scuba diving, but you dive deeper than your insurer's maximum depth limit, expect to pay a flat fee of $2.50 to $5 per month per $1000 of coverage.
In some cases, however, you may not be charged any flat fee on top of your base premium. Talk to your life insurance agent – they can help you find the best life insurance company for your specific case.
Can I lie on my application?
Sure, you can lie, but you shouldn’t. You also shouldn’t be vague about your hobby and how often you do it. Why? If you die within the first two years and the insurance company finds out that you were lying about having a hobby, they can attempt to remove premium payments directly from your death benefit or try to cancel the death benefit in full. If you're falsely accused, you'll be able to contest their accusations, but it's likely to stick if you willingly withheld information.
Does every company assess risk the same?
Nope – where’s the fun in that? Because each insurance company and underwriter has different thoughts, requirements, and expectations for each sport, you really have to do your homework (or let a life insurance agent do it for you). Some are lenient and flexible on some activities while they’re especially strict on others. An independent life insurance agent is a great resource in this situation – they’ve seen it all and know which life insurance companies are best when it comes to specific hobbies (and medical conditions).
That being said, we do recommend picking an insurance company that has specific, concrete instructions and verbiage on what they do or don’t allow.
If you’ve never seen Along Came Polly, I highly recommend it. It’s a nice reminder that we all need a little Polly in our lives and can afford to take some risks from time to time. However, in order to best experience life and all it has to offer, you need to be safe about your hobbies and protect yourself whenever you can. Because when it comes to buying life insurance, it’s more important to be smart than risky. By shopping around, speaking to an independent agent so she can help you compare quotes from multiple companies, and disclosing your hobbies to the insurance company, you’ll be more than ready for your next adventure.