What Is a Life Insurance Premium?

What Is a Life Insurance Premium?

Life insurance can be a valuable asset for people in retirement as well as those planning for the long-term security of their families. It allows you to provide financial protection for your beneficiaries after your death. Some types of life insurance also have additional financial benefits like cash accounts that can grow in value and be accessible during your lifetime.

When you're buying life insurance and budgeting for that expense, your premium is an important consideration. Here's what you need to know about life insurance premiums.

What Is a Life Insurance Premium?

A life insurance premium is the amount you pay to a life insurance company in exchange for the coverage you receive from your policy. You may pay your premium either monthly, quarterly or annually, depending on the terms of your policy.

The amount of your premium is set at the time of purchase, and your coverage will stay in place as long as you continue paying your premiums.

Key Factors in the Cost of Life Insurance Premiums

Life insurance providers charge varying premium rates based on their risk assessment of each applicant. They're trying to estimate the likelihood of having to pay a claim on your policy before your coverage expires (and before they've received many premium payments from you).

The life insurance company will use certain personal information in your application to assign you to one of several standard rate classes or risk categories. Along with your personal data, the type of insurance coverage you buy will also impact your premium rate.

Here's a closer look at some of the specific cost factors:

Type of Policy

Term life policies generally have lower premiums than permanent policies. That's because the limited duration of a term policy presents lower risk to the insurer of having to pay a claim before the policy expires.

Some permanent life insurance policies that include cash value accounts, such as variable universal life, offer flexible premiums. This feature allows you to pay either more or less than the original premium amount. Extra premium payments increase your policy's cash value, while money from your cash value account covers the gap if you elect to pay less out of pocket.


Life expectancy is a major component of an insurance company's risk assessment. Because younger applicants buying term life insurance have a high likelihood of outliving their policies, insurers charge them lower rates.


In determining your life insurance premium, insurers will look at whether you have certain health conditions that might lower your life expectancy, such as heart disease, diabetes, obesity, asthma or high blood pressure. The better your health, the lower your premium will be when you purchase a policy.


A woman will typically pay a lower life insurance premium than a man for a comparable policy if their age and health status are the same. Again, the main reason is the difference in life expectancy: In the U.S., women outlive men by an average of more than five years.


You will pay a higher premium for a life insurance policy if you work in a dangerous job or engage in risky habits or activities like smoking or skydiving. In fact, many life insurance companies won't sell policies to people with certain extreme hobbies.

Ways To Get a Lower Life Insurance Premium

  • Shop around for the best rates.

  • Maintain a healthy lifestyle so you qualify for a favorable rate class.

  • If your health improves significantly, or you stop smoking or engaging in other dangerous activities, ask your insurer to reassess your premium.

  • Earn a discount by paying your premium annually instead of in monthly or quarterly installments.

Life insurance can be an important part of the financial planning of retirees. Before you buy life insurance, take some time to understand how your age, sex, health, lifestyle and type of policy affect the cost of life insurance premiums. With that knowledge, you may be able to find ways to lower the cost. In any case, the more you know about life insurance premiums, the better prepared you will be to get the best coverage you can afford for you and your family.

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