Factors That Impact Your Life Insurance Premium

Everyone needs life insurance. It is one of the best ways you can protect your family’s future. However, if you are making the wise decision to purchase life insurance, you're probably wondering which factors will affect the cost of your life insurance premium.

Understanding the factors affecting your rates will help you in comparing life insurance policies. Here are some factors that can affect the cost of life insurance.

List of Factors That Affect Your Life Insurance Premium

• Age and gender
• Coverage type and amount
• Credit-based insurance score
• Driving and criminal records
• Exercise and diet habits
• Lifestyle and hobbies
• Occupation

How Age and Gender Affects Your Life Insurance

Life insurance companies have underwriters that take into account the risk factors of an individual to help determine the cost of life insurance for that person. Younger, healthier people get better rates for life insurance than older people with preexisting conditions or who are likely to develop conditions or diseases. If you are in your 20s without preexisting health issues, now is the best time in your entire life for affordable life insurance rates. 

Gender also plays a role in your cost of life insurance. According to data from the National Vital Statistics Report provided by the Centers for Disease Control and Prevention (CDC), U.S. women live to around age 81 and U.S. men to age 76. Because women tend to live longer and cost life insurers less, they have cheaper life insurance rates.

How Your Coverage Impacts Your Life Insurance Cost

Life insurance is available in different types and different amounts of coverage. The more coverage you purchase, the more expensive the coverage will be. Next, you need to consider the cost of the different types of life insurance. 

There are 2 basic types of life insurance: whole life and term life insurance. Whole life (sometimes called permanent life) insurance covers you for your entire lifetime and is the most expensive type of coverage. Term life policies are available for a specific period, such as 10-, 20- or 30-year policy terms. Term life is more affordable and maybe a good option for you if you are on a budget. In addition, some term life policies offer the opportunity to convert to a whole life policy at the end of the policy period.

Variations of whole life insurance called universal life insurance and variable life insurance also are available. These policies have a savings component that is added back to the cash value of the policy. In addition, some universal life insurance policies have flexible payment options, so they may be more affordable than a whole life insurance policy but typically more expensive than term life insurance.

Credit-Based Insurance Score

While your credit score shouldn’t directly affect how much you pay for life insurance, your credit report may contain information that could impact your credit-based insurance score and your rates. 

Your credit-based insurance score is rated by specific agencies and is based on factors like past bankruptcies, income to debt ratio, driving record and your insurance history. For example, if you have a history of missing payments, you could be given a higher rate for life insurance. Your credit-based insurance score looks at factors that may make you more risky to insure.

Your Driving and Criminal Records

Past driving violations can impact life insurance rates. A life insurer may look back over the past 5 years of your driving record to determine how many recent violations you’ve had. Unfortunately, multiple driving violations could mean you won’t qualify for the best life insurance rates. 

Whether a criminal record affects your life insurance premium will depend on the type of infractions against you. Misdemeanors will rarely increase the cost of life insurance. However, a felony conviction could make it nearly impossible to find life insurance, and if you do find it, it could be costly.

Exercise and Diet Habits

Your history of preexisting conditions may make your life insurance more expensive, but did you know that the type of food you eat could also affect the cost of your life insurance? You may wonder why — it is because unhealthy foods can have harmful long-term effects on your health. So you may want to consider what you are putting in your mouth before applying for life insurance.

You could also be denied life insurance if you’ve ever used drugs, or it could make your life insurance premium very expensive. If you answer yes to drug or alcohol use in the present or past, you may not be eligible for the best life insurance rates.

High-Risk Occupations and Lifestyle

This one is pretty obvious to most people. If you are a skydiver, your life insurance rates are going to be more expensive than those of an accountant — although an accountant’s stress level can get pretty high during tax season! 

Some professions considered high risk by life insurance underwriters and subject to more expensive rates include roofers, pilots, commercial fishers and loggers. In the same line of thinking, these hobbies are considered high risk by life insurance companies: bungee jumping, race car driving, rock climbing and hang gliding, to name a few.

Smoking and drinking also are lifestyle choices that life insurers consider dangerous risks because of the associated conditions and diseases they can cause.

Your Prescription History and Life Insurance

As with preexisting conditions, insurance companies can also consider your prescription history when determining the cost of your life insurance. For example, if you are taking a medication known to treat a condition that is regarded as high risk by the company, you could be looking at a higher life insurance premium. The insurance provider could look back as far as 10 years in some cases. 

Life Insurance Riders and Premiums

Life insurance policies, whole life insurance policies, in particular, are customizable. You can add coverage options that add extra benefits, but they also add to the cost of your life insurance policy. Some common types of life insurance riders include:

• Guaranteed insurability rider: Lets you purchase additional coverage during the policy period without a medical examination
• Accidental death rider: An additional coverage you can add that will pay a greater benefit amount if your death is the result of an accident
• Family income rider: Pays your family in payments over time to replace your regular monthly income after you die
• Waiver of premium rider: Allows you to stop paying your premium if you become permanently disabled or lose your income because of an accident or injury

Travel and Life Insurance

Domestic travel should not affect your life insurance premium. However, frequent travel internationally could increase your premium. Looking at it from the life insurer’s point of view, the more you travel, the more you are exposing yourself to potential risks that could affect your health. Also, if you are frequently out of the country, this could make an underwriter question your residency status. Most states — except Florida and Georgia — allow for underwriters to use travel as an underwriting criterion. Other states have laws that do not allow life insurers to take adverse action based on lawful travel. These states include California, Connecticut, Colorado, Illinois, Maryland, Massachusetts, New York, Oklahoma and Washington.

Best Life Insurance Companies

With life insurance, you want to choose a provider that offers the best coverage at the most reasonable rates. If that sounds like a daunting task, you can relax. Compare quotes below to find the best coverage.

Get the Best Rates

Life insurers look at several factors to determine your rates. So how do you get the best price on life insurance? First, buy while you are in your 20s and are still healthy for the best life insurance rates. You can also give up unhealthy habits like drinking, smoking and fatty foods to make yourself a better risk for life insurance companies.

Frequently Asked Questions