How Do Life Insurance Companies Calculate The Risk Factors?

Ever since the 17th century, when Edmund Halley, (the famous English astronomer that Halley’s Comet is named after) created the very first scientific table outlining a person’s presumed longevity; insurance companies have had the blueprints to modern-day life insurance plan calculations.  Halley’s “mortality tables”, as they were called, relied heavily on factoring in a person’s age, location, occupation, risk factors (smoker, drinker, extreme athlete, etc.), and common sense (a man who is 98 years old is far more likely to pass away than a man who is 35 years old) to calculate a person’s individual mortality rate.

In the present, life insurance companies use a very similar formula to illustrate just how risky a potential client would be as an investment.  When weighing the person’s inherent risk factors, the company is then able to determine how much to charge the individual for a life insurance policy.