How are life insurance premiums calculated? –

The amount you pay for life insurance depends on a wide range of factors, from your age and job to your health and lifestyle. And if you do find yourself with higher insurance costs, there are a number of lifestyle changes you can make to try to reduce this.

A couple with forms on a table as they try to work out their life insurance costs

Reading: How are life insurance rates set

what is a life insurance premium?

Whatever type of life insurance you purchase, you typically have to pay a monthly fee to cover the cost. this fee is known as the life insurance premium.

Your agreement with your insurer means that as long as you continue to make these payments, your life coverage will remain in force. must pay upon your death when your family needs to make a claim.

However, if you miss a payment, your coverage may lapse. In such circumstances, you could be left without life insurance, at least temporarily. and you may need to buy a new, and possibly more expensive, policy to get your coverage back.

How are life insurance premiums calculated?

Insurers use a wide range of factors when setting life insurance premiums for each client. These factors include the type of policy you purchase, the amount of life insurance coverage you need, as well as your personal circumstances.

all this creates an image of you and the risk that you will die within the term of the policy. The higher the risk, the higher your insurance costs are likely to be.

what factors affect how much you pay in life insurance premiums?

The factors that dictate how much you pay for life insurance can be divided into two categories:

  • those that are specific to the policy you want to take out
  • those that are linked to your own personal circumstances


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How long you want the policy to last plays an important role in setting your premiums. If you opt for level term life insurance, the policy only covers you for a set period of time. this is usually 20 or 25 years.

With term insurance, the longer the term, the higher the premiums tend to be. This is because there is a greater chance that the insurer will have to make a payment.

Alternatively, whole life insurance is designed to remain in force until your death. Because these policies are meant to pay out for good at some point in the future, the sooner they’re taken out, the lower the premiums tend to be. This is because the insurer can usually collect more money in premiums before finally paying.

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The size of any potential payment plays a large role in setting your premiums. the more coverage you want, the more it will cost you each month. There is usually a direct relationship between the amount of coverage your policy provides and the premium. so a £200,000 policy could be twice as expensive as one that insures you for £100,000.

level term or decreasing term

Level term insurance maintains the same amount of coverage throughout the policy. Decreasing term policies are also called mortgage life insurance because the scope of coverage is designed to decrease over time as you pay off your mortgage.

For two policies with the same initial level of coverage, declining term life insurance tends to have cheaper premiums, all other things being equal.


If you get a life insurance policy that also covers your spouse or domestic partner, the premiums are likely to be higher than on an individual policy. The way a joint life insurance policy is set up can also affect the amount of your premiums.

Such policies sometimes pay only on the first death, while others only pay if both spouses die within the term of coverage. the latter type of insurance may have lower premiums since there is less chance of both partners dying. joint policies are often cheaper than buying two separate individual policies.

your age

Your age matters when it comes to calculating life insurance premiums. In general, the younger you are, the lower the premiums on any given life policy.

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This is especially true when it comes to term life insurance that runs for a fixed period of, say, 25 years. This is because, on average, younger policyholders are less likely to die within the term of the policy.

Similarly, with whole life policies, the younger you are when you buy one, the lower the premiums tend to be. This is because the insurer will likely collect more payments before having to settle a claim.

your occupation

If you’re employed in an occupation that an insurer classifies as high-risk, you can expect to face higher premiums. Thus, for example, office workers may pay less for life insurance than firefighters or heavy vehicle drivers, all other things being equal.

your lifestyle

When you apply for a life insurance policy, you are asked questions about your lifestyle coverage factors. these include how much you exercise, if you smoke, and how much alcohol, if you drink, in a typical week.

your marital status

some research suggests that married people may have a longer life expectancy. this could be due to the emotional support they receive from their spouses, as well as because they tend to eat healthier, according to some studies.

your height and weight

Insurers tend to view overweight or obese customers as having a higher risk of developing conditions such as diabetes or heart disease.

your health

Many life insurance applications ask you questions about your current health status, as well as any medical problems you’ve had in the past. a history of serious illnesses could increase your premiums. it is vital to fully disclose these details, as well as any medications you are taking. otherwise, your policy could be canceled or a claim denied.

family history of disease

If certain hereditary conditions run in your family, this could affect the amount you pay for life insurance. these can include diabetes, stroke, and certain types of cancer. however, insurers consider how many family members have been affected when deciding whether to pay higher premiums.

how to reduce the cost of your life insurance

By understanding the factors that influence life insurance costs, you may be able to consider lowering the cost. Clearly, you may have little control over factors like your age, occupation, and health status, for example. but there are some steps you can take to pay less.

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  • do not delay. In general, the sooner you buy a life insurance policy, the less it will cost, all things being equal.
  • Consider downsizing on term insurance. If you want a life policy to ensure your family can stay in your home after your death, you can opt for decreasing life insurance. the amount of coverage drops each year as you pay off your mortgage debt. this means premiums are typically lower than level term insurance, where coverage stays at the same level throughout the policy.
  • make lifestyle changes. getting in shape, quitting smoking, and cutting back on alcohol are all good ideas in themselves. and the fact that taking such steps could lead to lower life insurance premiums is an added bonus.
  • don’t over-insure. our life insurance calculator could help you determine the right level of coverage based on your family’s status, as well as your mortgage and any other debts.
  • consider buying a life insurance policy joint. This type of policy insures a married couple or civil partnership for a previously agreed period of time. Some joint policies only pay when the first partner dies and others if both partners die during the term. the latter type might be appropriate if your main concern is that your children will not be able to get by financially without both parents. a joint policy is usually cheaper than two separate individual policies.