7 Factors That Affect Your Life Insurance Premium

Life insurance can help you protect your loved ones from financial strain, but it’s also a major investment. Over a period of years, a lower premium can yield major savings. When you’re pricing life insurance policies, you’ll want to consider the major factors that insurers use to calculate the cost of your premiums.

Some factors considered for life insurance are beyond your control, such as your age. However, you can take steps to lower your life insurance premium in other ways, including making lifestyle changes and improving your health.

Key Takeaways

• Life insurance is a financial tool that helps you provide for your loved ones after your death, but it’s also a significant investment.
• Many factors contribute to the cost of your premium, whether you qualify for discounts, and even whether you can be covered by a given carrier.
• Age is the most important factor in determining your premium cost. The younger you are, the lower your payments.
• Gender is also a key factor in life insurance costs, as women generally live longer than men.
• Insurance companies also consider your health, lifestyle, family medical history, driving record, whether you smoke, and more.

1. Age

The primary factor affecting the cost of life insurance premiums is age. Life insurance policies are less expensive for younger people with longer life expectancies and less likely to get ill. In some cases, you may not even qualify for life insurance if you are over a certain age.

Typically, the life insurance premium cost increases from 8% to 10% on average for every year of age. Essentially, the longer you wait to buy life insurance, the more you will have to pay for premiums. With term life insurance, your premium remains the same every year. However, after your term life insurance expires, should you buy insurance again, your premium will likely be higher because you are older and your health status may have changed.

The premiums for whole life insurance should stay the same throughout the policy, although they will usually be higher than the rates for a term policy with the same death benefit. Qualifying medical exams are likely to get more stringent as you age.

2. Gender

Gender is also a significant factor in the price of life insurance. Insurance carriers use statistical models to approximate how long someone with a specific profile will be around. Women, on average, live nearly five years longer than men, so they have lower rates.

3. Smoking

Smoking puts you at a higher risk for many health problems. Thus, life insurance companies charge more to insure smokers. In fact, smokers may pay more than twice as much as non-smokers for comparable coverage.

An insurance company may classify you as a smoker even if you occasionally smoke cigarettes, cigars, or vapes.

Warning

If you lie to your insurance company about your smoking habits and get caught, your policy could be canceled.

4. Health 

The underwriting process for most carriers includes a medical exam in which the company records your height, weight, blood pressure, cholesterol, and other vital metrics. It may also require an electrocardiogram (ECG or EKG) to check your heart.

It’s important to manage serious conditions such as high cholesterol and diabetes before searching for coverage to ensure a competitive rate. Some companies offer “no exam” policies, but expect to pay more for this coverage.

5. Lifestyle

If you lead a risky lifestyle with hobbies such as racing cars, scuba diving, or rock climbing, you’ll probably have to pay substantially more for insurance. Some companies also charge more if you have a relatively dangerous profession, such as police officer or miner.

6. Family Medical History

Having a family history of stroke, cancer, or other serious medical conditions may predispose you to these ailments and result in higher life insurance rates.

Carriers are usually interested in any conditions your parents or siblings have experienced, especially if they have contributed to a premature death. Some life insurance companies factor in your family’s health history more than others.

7. Driving Record

Many life insurance companies will look at your driving record during the underwriting process. Whether or not they ask about violations on the application, they can access your Department of Motor Vehicles records to find out if you have any concerning violations.

Remember that the last three to five years carry the most weight. So, if you’ve improved your driving habits since then, you may benefit from a more favorable price.

What Is the Age Limit for Life Insurance?

Each life insurance company and policy will have its own age limit for applicants to qualify for life insurance. Generally, the older you are, the more difficult it will be to get life insurance. Many life insurance companies do not offer life insurance policies after you reach a certain age (such as 85).

How Does Gender Affect Life Insurance Premiums?

Men generally pay more for life insurance than women because they have a shorter life expectancy. However, gender is not the only factor that determines premium prices. Other factors, such as lifestyle and age, can make one policy more expensive than another for different people.

What’s the Best Age To Get Life Insurance?

The younger you can purchase a life insurance policy, the more affordable it will be. When you buy life insurance, you’ll also want to consider your income and coverage needs.

The Bottom Line

Life insurance is a common financial tool that can provide security for your loved ones who depend on you. A life insurance policy can give you peace of mind that your beneficiaries won’t face financial hardships if you die. However, life insurance can also be a significant expense and is not necessarily ideal for everyone.

Familiarize yourself with different types of life insurance, such as term, whole, and variable life insurance. Then, consider consulting with a financial professional to determine which life insurance may be right for your situation and goals and how to reduce your premium costs.