The price of a life insurance policy mainly depends on various conditions such as the age, gender, health condition and use of tobacco. The cost is determined through a mortality table, which uses probability and statistics to provide the rate of premium. The morality tables are very important in American life insurance market. The tables inform about the family history and the history of the health of the person, applying for getting the insurance policy.

The mortality tables are separated depending on the living style of the applicant, for example, if the applicant is a smoker, he is categorized in the tobacco category, and if the person is a non smoker, he is categorized in other sections. The rate of insurance premium increases with the age of the policy owner as the probability of death increases with age and the premium amount may also increases if the person is a smoker.

The life insurance companies in America give the life insurance policies to applicants after getting the reports from the Medical Information Bureau i.e. MIB , which is a government organization that keeps the records of medical history of the people and the organization also provides information about the family history of the applicant. Life insurance companies are not bound to provide insurance policies to anyone in America and only by applying to get life insurance policy, one cannot ensure to get the policy.

There are mainly four categories, in which the health of an individual is analyzed by the life insurance companies before the insurance is sanctioned: Preferred Best, Preferred, Standard, and Tobacco.

• Preferred Best :
  • Preferred best is the category in which the policy holder is considered the healthiest and safest for giving a life insurance policy. A person is categorized in “Preferred Best”, if he has a good medical history and he is not taking medicine for critical health problems.
  • The family medical and health history of the person is also analyzed and, the person in preferred best is said to be one, who has no adverse family medical, such as diabetes or cancer. If a person holding a preferred best goes to an adventurous trip which may cause risk to his life, the policy status is changed from preferred best to standard.
• Preferred :
  • A person is categorized in the preferred category, is he is taking some medicines for a health problem or he has a family history of some medical problems.
• Standard :
  • The commonest form for life insurance is Standard, in which, most of the insurance applicants are given insurance policy.
• Tobacco :
  • It is the category in which, the applicant who is a smoker gets the insurance policy.

There are also other some policies called Stranger Originated Life insurance, where a person who has no relationship with another person can take insurance policy to give benefit to the nominated beneficiary.

If a person is buying life insurance policy, he should be careful of many things. Life insurance policies provide tax benefits but such tax benefit also depends on the type of policy.