What Are Life Insurance Premiums? [Get the Top 7 Premium Secrets!]

What are life insurance premiums determined by?

Here are the 7 main factors that life insurance companies use to figure out what your life insurance premium will ultimately be:

1. Policy Type

Are you buying term life or permanent life insurance? Term life insurance is usually the least expensive policy and whole life can be the most expensive. There are so many other types of life insurance such as universal life, IUL, final expense, and guaranteed issue to name a few. 

2. Coverage length

Whole life insurance lasts you for your entire life which is a major reason why it is more expensive than term. With term life insurance policies, you have to choose a term length. The most popular term lengths are 10, 15, 20, and 30-year term. The longer your term life policy lasts, the higher the premium will be.

3. Face Amount

The more life insurance coverage you want the more expensive it will be. Face amount is another word for Coverage Amount. If your face amount is high, your premium will be higher.

4. Health

Your health is a major factor and is often the cause of the most confusion once the life insurance company approves your policy. Underwriters look at the insured’s personal health history, their family health history and if you take an exam — the results of your paramedical exam.  You may be “healthy”, but you may not be “life insurance healthy”. Underwriters analyze all of these health factors to determine your risk now and in the future.

5. Life Insurance Riders

Life insurance riders are a way to customize your life insurance policy. They can provide you additional coverage or adjust your policy. Some life insurance riders are are included at no extra cost depending on the policy and company you apply with.  Others riders will raise your rate.

6. Lifestyle

Life insurance companies may also order a Motor Vehicle Report to see your driving history. They can also look into your financials and find your credit score. They’ll want to know about your hobbies and occupation to determine if they’re dangerous and risky. All of these lifestyle factors are analyzed by underwriters to determine your health class rating which ultimately determines your life insurance premium.

7. Age

Life insurance premiums will go up as you get older. Rates increase slowly year by year until your get to around age 50. At this time rates begin to climb quickly every year.

Read more about life insurance rates by age

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