Why are Jim's premiums lower than Ann's for their individual income protection insurance policies?

Jim's premiums are lower than Ann's primarily because he has a longer deferral period than Ann. The deferral period, also known as the waiting period, is the length of time an insured person must wait after a claim is made before benefits are paid out. A longer deferral period means that the insurer assumes a lower risk since the policyholder is responsible for covering their expenses for a longer duration before receiving benefits. As a result, a policyholder with a longer deferral period typically pays lower premiums compared to someone with a shorter deferral period, as the insurer has reduced potential liability.

Factors like pre-existing conditions, age, and job risk also significantly influence insurance premiums. If Ann has pre-existing conditions, that would increase her risk profile and consequently her premiums. Similarly, being older typically results in higher premiums since age can correlate with increased health risks. Lastly, if Jim works in a lower-risk job, it could contribute to his lower premiums as well; however, the impact of the deferral period is a more direct and significant factor in determining the premium differences between the two individuals.