Maryland Life and Health Insurance License Practice Exam

Which of the following factors is considered when determining an insured's life insurance premium?

1. Marital status

2. Credit score

3. Avocation (hobby)

4. Age of dependents

The correct answer is: Avocation (hobby)

When determining an insured's life insurance premium, one significant factor that is taken into account is the insured's avocation, or hobbies. Underwriters assess the risk associated with certain activities that an individual engages in during their free time. Some hobbies, such as skydiving, scuba diving, or rock climbing, may be considered higher risk than more conventional or low-risk pastimes. Higher risk activities can lead to a higher premium because they increase the likelihood of an accident that could affect life expectancy. Therefore, underwriters evaluate the types of avocations a person participates in to determine the mortality risk, which directly influences the calculated premium for life insurance. Factors such as marital status, credit score, and the age of dependents are not typically direct determinants of life insurance premiums. While marital status can influence financial responsibilities, it does not directly correlate with risk assessment in the context of life expectancy. A credit score may be relevant for certain types of insurance but does not weigh into life insurance premiums directly. Similarly, the age of dependents may be considered regarding financial obligations but does not directly affect the risk assessment of the insured. Thus, avocation is a crucial factor in determining the premium amount due to its direct relationship with risk.