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Calculating Your Life Insurance Premiums

Your Life Insurance Premiums

Reviewed By: Rob Pinner

Rob PinnerRob Pinner is the founder and CEO of Pinner Financial Services servicing all 50 states. Rob started his insurance career in 2002. Full Bio >

Checked By: Holly Mitchell

Holly Mitchell’s background in life insurance insurance goes back to 1985 when she worked for her father who was a New York Life agent. Holly has a marketing degree from Auburn University and has had a life insurance license since 2008. In addition to advising life insurance for customers all around the country, Holly is our website fact checker.
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Last Updated: September 28th, 2023

Life insurance, often considered the bedrock of solid financial planning, can sometimes be a maze. The premiums – the amounts you pay for a policy – are influenced by many factors. By understanding what affects these rates, you can make informed decisions and possibly save in the long run. Let’s demystify how your life insurance premiums are determined.

Factors Determining Your Life Insurance Premiums

Life insurance provides a financial safety net for your loved ones, ensuring they are cared for in the event of your untimely passing. But how does one determine the price for such peace of mind? Premiums aren’t arbitrarily set. They’re calculated based on numerous factors, including your health status and credit score. In this guide, we’ll unravel these factors for you.

  1. Health Factors

Health is a primary factor that insurance underwriters consider. Logic dictates – the healthier you are, the less likely you are to make a claim. This is why potential policyholders undergo a medical exam. High cholesterol, high blood pressure, or a history of chronic illnesses could elevate your premiums.

Case study: John, a 35-year-old non-smoker with a clean bill of health, secured a term life policy at a much lower rate compared to his same-aged friend Mark, a smoker with hypertension.

  1. Occupation & Hobbies

Life is an adventure, but some adventures carry risks. Due to occupational hazards, Pilots, miners, and construction workers often face higher premiums. Similarly, you might see a spike in your premium if you’re into skydiving or shark diving. It’s all about risk for insurance companies.

  1. Credit Score

This is surprising for some, but your credit score can impact your premiums. An excellent credit history may suggest you’re responsible, whereas a poor score might indicate potential risk. The belief is that those who manage their finances well tend to manage their health and other life risks better.

  1. Age

Age is a significant determinant. As you grow older, the risk associated with insuring you increases. A graph showcasing age vs. premiums would depict a steady rise. It’s always advantageous to lock in a policy when you’re younger and healthier.

  1. Type of Insurance

Different policies come with different premiums:

  • Term life: This offers coverage for a specific term (10, 20, or 30 years). It’s generally more affordable than its counterparts.
  • Whole life: This covers your entire life and also builds cash value. It’s more expensive.
  • Universal life: Also a permanent policy, it offers flexibility in premiums and face amounts.
  • No-exam life insurance: Convenient but often costlier as the insurer takes on more risk without a medical exam.
  1. Amount of Coverage

The more coverage you seek, the higher the premium. It’s a simple math: a $500,000 policy will cost less than a $2 million one.

  1. Extra Features/Riders

Adding riders or special provisions to your policy (like an accidental death benefit or a child rider) can elevate your premium. Evaluating if the extra cost provides meaningful value to you is crucial.

  1. Insurance Company Rates & Quality

Not all insurance companies are created equal. Rates can vary widely, so shopping around is crucial. But remember, cheaper isn’t always better. Assess the company’s reputation, claims process, and customer reviews before making a decision.

  1. Policy Discounts

Some insurers offer discounts if you bundle policies, maintain an excellent health record, or make annual payments instead of monthly. It’s worth asking about these discounts when shopping around.

  1. FAQ

Q: Does gender affect premiums?

A: Typically, yes. Statistically, women live longer than men, which can lead to slightly lower premiums for women.

Q: Can I reduce my premium later?

A: Some policies offer the flexibility to adjust coverage and, subsequently, the premium. Discuss this with your insurance provider.

  1. Glossary

  • Underwriter: A professional who evaluates the risks of insuring a person or asset and establishes the pricing.
  • Actuary: A business professional who deals with the measurement and management of risk and uncertainty.
  1. Tax Implications

Life insurance premiums aren’t typically tax-deductible. However, the death benefits received by beneficiaries are usually tax-free. Always consult a tax professional for specific advice related to your situation.


Life insurance is more than just a policy; it’s a promise to your loved ones. Understanding the factors determining your premiums ensures you’re not just purchasing a policy but investing in a well-thought-out financial decision. Remember, it’s not about finding the cheapest policy but the right one. Now that you’re armed with this knowledge consider contacting a trusted insurance provider for a tailored quote.

If you’d like to save money on premiums or maximize the amount of coverage you can buy, you can help yourself by controlling the components you can control: your general health, your credit score, the timing of your purchase, and your coverage choices.

With insurance, knowledge goes a long way.

Your own knowledge and the knowledge of an independent insurance agent who knows the nuances of dozens of insurance companies.

Let us know how we can help.

Call 1-800-712-8519.

Doug Mitchell, CLU

Doug Mitchell, CLU

Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA. Doug has spent close to 30 years in the life insurance and financial planning industry and has held licenses to sell securities, long-term care insurance, health. Some other notable items about Doug: Top of the Table Million Dollar Round Table member (MDRT). (MDRT is a global, independent association of the world’s leading life insurance advisors) | Premier Partner with Lincoln Financial and Cabinet Member | Served two years as President of the Auburn/Opelika Association of Financial Advisors | Life Millionaire status at Horace Mann Insurance Company and was awarded the Life Agent of the Year Award | New York Life, Executive Council Member | Currently serves as President of Ogletree Financial, a life insurance General Agency. | Doug is also a financial blogger addressing the topics of life insurance, annuities and retirement income planning.

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