Factors That Affect Your Life Insurance Premium

Life insurance is an agreement between you and an insurance company, guaranteeing payment to your named beneficiaries when you pass away. To uphold your end of the contract, you must pay agreed-upon premiums throughout your lifetime. 

Life insurance is one of the best ways to protect your family’s financial future in the event of your untimely death. While beneficiaries are entitled to use their compensation for any purpose, they often spend this money on a child’s education, mortgage repayments, or cover important bills.

Despite the benefits of a good life insurance policy, many people fail to secure comprehensive coverage. One of the primary reasons for this is the perceived cost. 

While life insurance can be a sizeable investment, knowing the factors that affect your premium can help you save a lot of money. The following guide discusses six of the most critical contributors to life insurance premiums, helping you find ways to lower your annual costs.


1. Your Age 

Age and life expectancy are the most important factors that affect life insurance premiums. This creates an unfortunate paradox for applicants as life insurance may not be a priority in your younger years. 

Since the likelihood of death increases with age, life insurance becomes more important as you get older. Unfortunately, this translates to more expensive premiums. 

Younger applicants tend to receive better life insurance quotes since they have a higher chance of outliving their policy. Insurance companies also benefit from young policyholders because they are likely to receive higher volumes of premium payments throughout their lifetime. 

Taking out insurance in your 20s or 30s can lead to significant savings on insurance premiums.


2. Health and Health History

Your health, health history, and family’s health history affect insurance premiums significantly. A clean bill of health and no evidence of hereditary diseases make you a low risk for an insurance company, allowing them to offer more affordable rates. A record of illness and a history of serious family health problems, like heart disease or cancer, is likely to increase the cost of life insurance.

Many life insurance providers require applicants to take a medical exam as part of the underwriting process. You typically need to provide medical records detailing your height and weight, blood pressure, and other factors that help them determine your overall health. If treatable factors, like cholesterol or obesity, make you a high-risk applicant, consider getting them under control to secure lower premiums. 

Some carriers don’t require a medical exam. Instead, they may gauge your health status based on the information you provide in an interview or through a questionnaire. The downside to this type of life insurance coverage is that it may be capped, and you often pay higher premiums.


3. Your Occupation 

Your occupation may affect a life insurance premium if your line of work impacts your health and safety. For example, mining is usually regarded as a dangerous profession, making life insurance premiums quite expensive in that industry. Since miners have a higher risk of chemical exposure or a workplace accident than an office administrator, insurers will almost certainly consider the increased health risks when providing a quote. 


4. Smoking and Tobacco Use

Smoking and tobacco use are directly linked to various severe health conditions, from cancer to lung disease. Smoking, vaping, and even chewing tobacco are major red flags for insurance providers and are likely to increase your premiums by default. 

Quitting your tobacco use can improve the quotes life insurance companies offer you. Some insurers may even lower your rates if you stop smoking while having an active policy. In most cases, you need to abstain from nicotine usage from 12 to 24 months before you can qualify for the rate change. 


5. Hobbies and Lifestyle

If you’re a thrill-seeker and spend your weekends on a race track, base jumping, or scuba diving, you can expect to receive higher life insurance quotes. Most carriers have a list of high-risk hobbies that increase insurance costs. 

However, the specific criteria used to determine the risk of hobbies can vary depending on the insurer. If you’re a motorcyclist, hunter, or engage in any hobby that could be deemed dangerous, shop around to find a competitive quote.  

Some insurers may examine your driving record as part of the underwriting process. A long list of serious traffic violations can influence their quotation, with recent DUIs, reckless driving convictions, and license suspensions holding significant weight. 


6. Type of Life Insurance Policy

The type of policy you apply for has a significant impact on premiums. Although many policies are available from various sources, the most common life insurance coverages are term life insurance and permanent life insurance. 

Term life insurance is active for an agreed-upon period, usually 10, 20, or 30 years. Throughout the policy, decreasing term life insurance reduces in price at a prenegotiated rate. Renewable term policies are generally the cheapest option initially. However, the premiums increase year on year. 

Permanent life insurance policies remain valid for your entire life unless you cancel the agreement or stop paying your premiums. There are several different types of permanent life insurance policies, including whole life, universal life, indexed universal, and variable universal insurance. Details regarding death benefits, cash value accumulation, and premium flexibility can vary by policy. 

Whole life permanent insurance is the most popular type of policy. Policyholders are entitled to a premium-based death benefit and a savings account. 


Weigh Your Life Insurance Options With Finance is us

It’s essential to weigh your options before applying for life insurance. With so many products and services to choose from, along with vastly different underwriting processes, finding the right policy can be a challenge. 

Learning about the factors that affect your life insurance premium helps you prepare for your application, enabling you to take action and benefit from the best possible rates. 

If you need assistance with your life insurance application, use the Finance is us digital platform. We provide impartial information, helping you navigate and manage your finances efficiently. Check out our blog for articles on insurance, investing, and banking. 


Disclaimer: All content on this site is information of a general nature and does not address the circumstances of any particular entity or individual, nor is the information a substitute for professional financial advice and services. 

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