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Apr 8, 20225 min

What Factors Affect Life Insurance Premiums?

Life insurance is a great way to secure financial stability for your beneficiaries and even build up savings if you take out a permanent policy with a cash-value element and tax-free benefits. But there are a few things you need to know about getting a policy before the good stuff begins, specifically factors that can affect your life insurance premiums.

We’ve got the lowdown on life insurance premiums and the factors that can impact the amount you pay.

Getting a life insurance policy

Taking out life insurance coverage can be a smart move for anyone wanting to protect their family and grow wealth while they're still alive. Whether you choose a term policy–where you're covered for a specific amount of time–or plump for permanent life insurance with its cash-value element, tax-free savings, and locked-in premiums, you'll want to know if you qualify first.

The cost of your life insurance premium is determined by several factors, such as your general health and lifestyle. Below, we’ve listed 9 factors that could affect your premium, so keep these in mind when searching for a life insurance policy.

1. Age

We don’t want to sound all ageist here, but you’ll need to pay higher premiums the older you get (we don’t make the rules). A healthy person getting life insurance in their 20s will pay a far lower premium than a healthy person who is 30 their senior. For example, getting a policy at age 45 could be 3x the premiums of a 25-year old even if both are in perfect health!

That’s why getting life insurance during your younger years makes a whole lot of sense. Plus, you might want to consider a permanent policy as opposed to term. Let’s say you get term coverage at 25 and keep it for 30 years. If you want to renew when it expires, your premiums are charged for a 55-year-old taking out a policy, which means you will pay more.

With permanent coverage, however, you lock in your premiums from the minute you sign up. As long as you keep paying into your policy, the premiums never change. Permanent life insurance is initially more expensive than term, but it’s better value for money in the long term, as you’ll pay the same for your premium at 25 as you do at 55.

2. Smoking

Pretty self-explanatory, this one. There are health risks associated with smoking– and some of those can be fatal. Therefore, you are considered a higher risk, and your premiums will increase if you're a smoker. A smoker’s premium could be 15-20% higher than a non-smokers, even in the same health otherwise. There's some hope if you've quit smoking during your policy, though. Your provider might lower the premium if your status changes to "non-smoker", i.e. if you haven’t smoked in more than a year.

3. Gender

Gender plays a role in life insurance premiums, and it’s the fellas who are having to fork out more on average. In fact, after age, gender is the biggest driver of life insurance premiums. That’s because carriers use statistics to determine how long someone with a specific profile lives.

And guess what? Men just aren’t living as long as women, with the average female spending five years longer on the planet. Yet, women are less likely than men to take out coverage. Go figure. Still, that might have something to do with the perception about women’s life insurance, which we’ve addressed here.

4. Health history

No big surprises here–your general health plays a significant role in determining your life insurance premiums. Insurers may even require a medical exam and access to your health records before issuing a policy.

Any history of medical conditions–such as cancer and heart diseases–will increase your premiums considerably. Providers will also look at your cholesterol levels, blood pressure, weight, and other metrics to determine your life insurance premium.

It’s the same for family history, too. It might be that you have no current health concerns but could still pay more for your premium if a specific illness runs in the family. While it’s not as impactful as your current health, it could bring those premiums up a notch.

5. Lifestyle

If you find yourself drag racing and paragliding during your downtime, providers will do more than raise an eyebrow–they’ll increase your premiums. That’s because you’re seen as more of a risk than someone who spends their spare time watching Netflix and going for a run around the local park. Anything that significantly increases your chances of dying–including lifestyle activities–will also raise your premiums.

6. Alcohol consumption and drugs

Alcohol is another health-related factor that can see you pay more for your life insurance premium. While it's not frowned upon quite as much as smoking, heavy drinkers can still find themselves paying more than someone who drinks responsibly. So if you're thinking of getting a policy but chug down 15 cans of beer each night, you may want to think about cutting back. Come to think of it; you might want to cut back even if you're not getting life insurance. Additionally, if you’ve ever been to rehab for drug or alcohol abuse, that will also significantly impact your premiums and ability to qualify for coverage overall.

7. Occupation

There are a fair few occupations that insurers deem high risk. These include loggers, pilots, roofers, and anyone who works with heavy machinery. When you apply for life insurance, the provider will ask for your occupation to determine the risk. If you’re a pilot who flies all over the world, you can expect to pay more than someone who sits at their desk writing an article about life insurance premiums.

8. Driving record

Now, this is one that people don’t often know about. When it comes to the underwriting process, insurers can look for driving violations by accessing the Department of Motor Vehicles to see your record–with a particular interest in the last three to five years. So if you have several parking violations on your license, you might find that your premiums are higher than someone with a sparkling clean driving license.

9. The policy itself

You may find that you're paying more depending on the policy you choose. For example, policies issued for larger death benefit amounts over longer terms cost more than smaller policies. Again permanent policies are usually more expensive than term coverage because they have more benefits, such as the ability to build and access wealth from your policy while you're still alive and access it tax-free. But they also offer more value over the long run, as your premium doesn't change.

In conclusion: life insurance premiums

Just remember to be honest in your application because if a provider finds out you've misinformed them, your policy could become null and void. Knowing which factors insurers consider before issuing life insurance means you can spend time researching the right policy for you and enjoy less stress, which will probably bring your premium down too.

Find some customized options and see what benefits you can qualify for your unique situation here.

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