A Matter of Lifestyle

If you've ever taken Prozac, pilot lessons or a scuba vacation, you'll pay more for life insurance -- even if you're in perfect health.

DANIEL FUNK, a 40-year-old small-business owner from Santa Monica, Calif., is in the prime of his life. He exercises regularly, eats right and doesn't smoke. Yet when he went to purchase life insurance a couple of years ago, he found he would have to pay through the nose for coverage because he was considered "high risk." The problem wasn't his cholesterol or blood pressure. Rather, the insurance company, Metropolitan Life, was concerned that he liked to go mountain climbing and scuba diving.

And Met Life wasn't the only one. It was only after some serious shopping with online insurance broker AccuQuote that Funk was able to find an insurer that was more impressed with his health than his hobbies and was willing to provide a decent rate.

Many people are surprised to discover that qualifying for the best rates typically involves much more than receiving a clean bill of health from your doctor. Insurers also try to identify people who lead certain, shall we say, risky lifestyles. Believe it or not, an insurance company might be more forgiving of someone who controls his high blood pressure with medication than someone who, like Funk, participates in dangerous hobbies. "The healthy bungee jumper scares me more than the well-medicated money manager in midtown Manhattan," says William Carroll, an actuary with the American Council of Life Insurers (ACLI).

So how much will your lifestyle cost you? It could more than double your expenditure over the life of the policy. To understand why, you first need to have a grasp on how term-life policies are priced.

When reviewing risk, insurance companies automatically divide people into two groups: smokers and nonsmokers. (Incidentally, some companies consider someone who uses any tobacco, including an occasional cigar or dip of chewing tobacco, to be a smoker.) Then, within these two groups, each person is broken down into one of three risk categories: Preferred Plus, Preferred or Standard. Some companies also have lower classifications for those who are perceived to be at greater risk of early death. But even within the top three tiers, the premium varies drastically depending on one's status.

Here are the current rates from Pacific Life for a $1 million, 20-year term policy for a 40-year-old male. A nonsmoker will pay $945 a year for a Select Plus (same as a Preferred Plus) policy, $1,065 for a Select policy and $1,965 for a Standard policy. And the rates are substantially higher for smokers: Select Plus is as high as $1,435 a year, a Select Smoker policy costs $3,525 and a Standard policy goes for a whopping $4,405. (Just another reason to quit smoking -- as if you needed one.)

Generally speaking, if you engage in activities that the insurance companies believe are risky, you're knocked out of the running for a Preferred Plus or Preferred policy. At best you may qualify for a Standard policy; toss in a few medical conditions and you'll be relegated to something below that. Here are the details on some less commonly known risks that could lead to hefty life-insurance bills.

Mental Health
Most people don't realize that insurance companies are just as interested in mental health as physical health. So if you're on Prozac or another antidepressant, it could cost you. The insurance companies worry that if you're depressed you may eventually take your life. And after two years, most policies are required to pay if someone commits suicide.

Not all depression is viewed as a risk factor, however. Most companies, for example, won't penalize you for what's known as "reactive depression." This would apply if, say, you took a minimal dosage of Zoloft for a few months after a specific (and traumatizing) event such as the death of a family member or a divorce. Be careful, though: A longstanding prescription could increase your premiums, says Don White, a spokesman for the Million Dollar Round Table, an insurance industry group.

According to AccuQuote, Transamerica Life Insurance Co. will classify you as "Standard Plus" if you're taking a regular prescription of Paxil and seeing a therapist. ("Standard Plus" is a notch above Standard, but below Preferred.) Some companies are even stricter, says the online broker: Protective Life Insurance Co. would give this same person a Standard rating.

Driving Record
Everyone knows a person's driving record affects his or her auto-insurance rates. Unfortunately, it also affects life-insurance rates. Just a couple of speeding tickets will do the trick. Most people are surprised that life-insurance companies ask about your driving record, says Byron Udell, chief executive of AccuQuote. The thinking: If you get caught speeding twice in five years, you're probably a habitually risky driver, he says. In fact, Bryan Place, a principal owner of online-insurance broker Termassistant.com, says Travelers Insurance will give someone a below-standard-rate policy if he has two moving violations in two years.

Place recently came across this issue while trying to find an insurance policy for a healthy 30-year-old male client who wanted to purchase $1 million in coverage now that his wife was pregnant. Even though his client was in perfect health, companies kept offering him the more expensive Standard rating because he had three moving violation within five years. Place finally found a policy at a Preferred Plus rating after he wrote a letter on his client's behalf explaining that the man is more mature now than he was at 25 and that he would surely be more careful now that he has a child on the way. Unfortunately, not all cases are so easily solved.

Credit History
What does one's credit history have to do with life expectancy? Insurers worry that people with bad credit or a bankruptcy in their past might not pay their insurance premiums, says Termassistant.com's Place. And since it takes an insurance company roughly five or six years to break even on the underwriting process, they take this risk pretty seriously. There's also the issue, once again, of suicide. Someone who's under great financial stress may feel that if he takes his own life, at least his family will be taken care of. Morbid, yes, but that's the theory.

(Wondering who else is looking at your credit score? Click here .)

Family History
Here's one more thing to blame on your family. If you have a parent or sibling who had cancer or a heart attack before the age of 60, you'll pay for his or her poor health. Even if your mother or father ate poorly and never exercised while you're a vegan marathon runner, the underwriter is unlikely to make a distinction. The reason is simple. Statistically, you're more likely to die from one of these ailments than someone who has no family history of heart disease or cancer. "The acorn doesn't fall far from the tree," says ACLI's Carroll. "People who live to be 90 have parents who lived to be 90."

How much will your father's poor health cost you? At First Colony, someone with a parent who had one of these ailments before age 60 will automatically be rejected from the Preferred Best and Preferred categories.

Insurance companies also care what you do in your spare time. One of the first questions a life-insurance agent will ask you during the screening process is whether you're a private pilot. That's a fair question, since flying a small plane can be highly dangerous. But plenty of more-common hobbies also raise eyebrows. As we mentioned earlier, mountain climbing makes the list, along with scuba diving, bike racing and helicopter skiing. In fact, anything that's considered an extreme sport will force you to write a bigger check to your insurer.

It's against the law to charge someone a higher premium if they live in a city like New York vs. a quiet suburb in Wisconsin. But where you travel is another story. If you regularly visit "dangerous" locales like Russia or if you volunteer with HIV patients in Africa, you're considered a much greater risk than someone whose most adventurous trip takes them to sunny Orlando, Fla. If your parents live in Israel, an underwriter may assume that you're going to visit them often in the future, warns Round Table's White, even if you don't mention it on your application.

Fighting Back
The good news in all of this? What's viewed as risky can vary by company, and in an effort to be competitive, companies will often change their criteria from year to year, says ACLI spokesman Jack Dolan. So by shopping around, you may find a company that won't penalize you for certain activities.

And a word of caution: While it might be tempting to lie about your hobbies or family health history on your insurance application, don't do it. Should you die in an accident related to the sport, for example, and the company discovers that you participated in this avocation before your signed the paperwork, it won't pay your benefit. "You don't want to give it a reason not to pay the claim," says AccuQuote's Udell.

Finally, don't forget that you can always apply for a new policy. So if you, say, clean up your driving record, go ahead and ask the company to lower your premium. If it won't, another company might.