10 Factors That Can Affect the Cost of Your Life Insurance

Did you know that most Americans overestimate the cost of life insurance by as much as three times its actual cost? That’s right. Life insurance is likely more affordable than you think.

However, several factors can influence your premium rates. Understanding these factors can help you make informed decisions about your coverage.

1. Age

Age is one of the most significant factors affecting life insurance costs. Generally, the younger you are when you purchase a policy, the lower your premiums tend to be. This is because younger individuals typically present lower risk to insurance companies. Locking in coverage while you’re young could save you significantly over time.

2. Gender

Statistically, women tend to live longer than men, which means they often pay less for life insurance. In 2023, the life expectancy for women born in the United States was 81.1 years compared to 75.8 years for men — a difference of 5.3 years.

3. Health Status

Your current health condition plays a crucial role in determining your premiums. Insurance companies typically require health questionnaires or medical exams to assess your health. Conditions like high blood pressure, high cholesterol, or diabetes may result in higher premiums.

4. Family Medical History

Insurers may also look at your family’s medical history to identify potential hereditary conditions. A family history of heart disease, cancer, or other serious conditions might affect your rates, even if you’re currently healthy. Insurance companies typically look at conditions that occurred in your immediate family (parents and siblings) and consider factors like how many relatives were affected and at what age they developed the condition.

5. Smoking and Tobacco Use

Tobacco users can expect to pay more for life insurance. This includes cigarettes, cigars, chewing tobacco, and sometimes even nicotine replacement products. Even “social smokers” who only use tobacco occasionally can be classified as smokers for insurance purposes.

6. Occupation and Hobbies

High-risk occupations (like construction or firefighting) or dangerous hobbies (such as skydiving or mountain climbing) can increase your premiums because they increase your mortality risk. Construction trades, commercial fishing, and agricultural work are among the occupations that insurers may classify as high risk due to higher statistical rates of workplace accidents.

7. Lifestyle Choices

Your lifestyle habits, including alcohol consumption, driving record, and even credit history, can influence your rates. Safer behaviors typically lead to lower premiums. A history of speeding tickets, accidents, or DUIs can lead to higher life insurance rates due to the associated risky behavior.

8. Type of Insurance Policy

Term life insurance is generally less expensive than permanent life insurance (like whole life or universal life). Term policies provide coverage for a specific period of time, while permanent policies offer lifelong protection and include a cash value component. Term life is like renting an apartment — it’s more affordable but temporary; permanent life insurance is like buying a home — it costs more but can build equity over time.

9. Coverage Amount

The amount of death benefit you choose directly impacts your premium. A $1 million policy tends to cost more than a $250,000 policy for the same person. It’s important to select a coverage amount that meets your family’s needs without overextending your budget.

Not sure how much coverage you need? You can use our Life Insurance Calculator to get a personalized estimate of your coverage needs. This simple tool considers your unique situation to help you protect your family’s financial future.

10. Policy Riders

You can customize your coverage by adding optional benefits, called riders, to your policy. Common riders include accelerated death benefits, accidental death, waiver of premium, guaranteed insurability, or child term riders. These add-ons can provide additional protection, such as accessing your death benefit if you become terminally ill or having your premiums waived if you become disabled. While some riders are free to add on, others come at an additional cost.

Finding the Right Coverage

While these factors can influence the cost of life insurance, remember that each insurance company weighs them differently. That’s why it’s beneficial to compare quotes and learn more about different providers to determine which is the right fit for you.

Written by: Diana Henry, Senior Digital Copywriter

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