7 Factors Behind in Determining the Life Insurance Premium

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  • Post last modified:November 29, 2018

Investing in a life insurance policy is going to be one of your wisest and most prized financial decisions.

Although it is a major investment of one’s life it assures the kind of financial security and freedom that is not possible in any other type of capital market investments.

Not only does it safeguard the future of our loved ones in case of death but also helps in saving a significant amount of money at good rates of interests for our own future as well.

Over the period of time, even a lower amount of premium paid regularly can help in accumulating a good amount of savings.

The modern investors always enquire about the basis on which their premium rates are decided. The cost of life insurance premiums is decided on the basis of a number of factors.

Some of these are not in our control as investors, while others we can still opt to change through sincere, persistent efforts.

Here are 7 Determining Factors that Affect the Premium

#1. Age

old age and premiumThe most important factor behind determining the cost of the life insurance premium is undoubtedly the age of the applicant.

The younger you are the cheaper it is! It becomes expensive as the age of the applicant advances (not the policyholder).

This is the reason that we suggest our readers to always be prompt and quick in applying for a life insurance policy to get the best offers.

Although there are different plans based on the different age groups in the social section the bottom line about the rate of premium doesn’t change in either of them.

The higher scale on age registers higher risk for the insurance company. And the hike in rates of the premium is just a compensatory measure for the risk.

But, that doesn’t mean your age makes you unqualified for a policy. The fact is you can’t get the same rate with your age.

We frequently see people over 85, who are looking for an affordable policy. Yes, it’s true and we always help them.

#2. Gender

Some people might wonder about the role of financial statistics with the gender of the applicant. Gender happens to be the second most crucial detrimental factor behind deciding the rates of the insurance premium.

Whether you are a male or female has a significant impact on your life term. There are scientific theories that justify that women, on an average, tend to live longer than men.

The obvious inference here would be that life longevity ensures the term of premiums to be longer that makes it cheaper for women. It means the women will pay the premiums for a longer number of years and thus the risk of insurance companies spreads further.

#3. Addictions (smoking, drugs etc)

If you are addicted to habits of smoking, taking drugs or excessive drinking etc then your life insurance policy is bound to suffer a setback. You will end up paying really high premiums in such circumstances.

These addictions make you completely vulnerable to severe ailments that can be fatal for life. For example, the buying cost of insurance policy itself is usually double in case of smokers.

Similarly, for the people who are involved in excessive drinking or smoking habits, the life insurance companies set the rates higher for them.

These habits damage liver and respiratory organs significantly which is proven by various medical findings.

Life insurance companies raise the prices of their policies to cover for their risk which in turn affects the rates of premiums as well.

#4. Family History and Medical Background

The insurers ask you about your family history. They want to know about the existence of some of the other chronic illness or any other medical problems running in the family that can affect your health up to any extent.

They try to find out the causes of death of your family members up to a few generations. At the same time, they will inquire about your current and past health status.

If there will be a record of any prolonged illness or diseases in your medical history it is going to affect the rates of insurance premiums.

For those who are healthy and live an active lifestyle, they have nothing to worry about here. If you have suffered any ailment in the past and have successfully recovered from it, there will be no harm in mentioning it. You must be able to present all the medical proofs pertaining to it.

However, if you are undergoing some kind of treatment, it needs to be mentioned. The insurance companies tend to find out about your current state of health through medical certificates and examinations.

Therefore, it is better to explain the treatment on your own. It inculcates the trust of the people and they may consider you for discounts on the basis of honest approach and cooperation.

#5. Occupation

While some professions do not demand much physical and mental endurance, there are others very risky and dangerous too.

Professions such as piloting, shipping, skydiving, car racing, mining, fisheries etc. have a higher chance for the accidental death of workers. Insurance companies consider these occupations in the high-risk bracket.

So, it implies- higher the risk, higher is the premium. There have been cases when the applicants are denied life insurance by private firms on the basis of their dangerous occupation fields.

However, these people must get insured through their corporate firms’ policies but for singular firms, it gets difficult as the demands of jobs can be very hazardous.

Some of these professions can have altering, dangerous effects on the mental and physical health of the person in long run such as continuous working in the radioactive exposure fields.

Usually, the people who are into high-risk professions tend to pay costly premiums.

#6. Lifestyle

We have already discussed the lifestyle habit such as drinking, smoking, and drugs that can have a significant impact on raising the price of life insurance policies.

These are a part of lifestyle but there are other noticeable lifestyle habits that can have an alarming effect on premiums. If your lifestyle choices are adventure trips such as SCUBA diving, paragliding, mountaineering etc., you may have to pay more towards life insurance.

The risk is the playing factor here as well. There can be various other activities or hobbies in your lifestyle routine that can make you a high-risk individual such as car racing, excessive junk eating leading to obesity, sedentary lifestyle with weakness and no activity, leading a life of depression and hypertension etc.

There are a lot of things being considered by insurance companies that may be seen with different perspectives. The idea is to lead a normal, healthy and happy life without any complications.

#7. Mode of Paying a Premium

This one is significant. Although people may not bother to think much about the mode of paying a premium as it is the later stage after the approval of the application.

Moreover, it doesn’t sound alarming from the customer’s end. We have observed that most of the people choose to pay premiums monthly or quarterly as it is easier for them to keep aside the money and get it deposited along with so that it doesn’t get spent.

However, the companies have to incur costs while keeping a track of your payments on a frequent basis. Therefore, their cost of operation becomes higher such as administration charges, processing of payments etc.

If you make the payment frequently the company may have to use more resources and thus the customer ends up paying an increased amount of premium.

On the other hand, if the premium is being paid annually instead of monthly, quarterly or biannually, the overall cost of premium will be lower. This benefits the customers as well as company both.

The customers can accumulate the current or fixed deposits interest on their savings for a year before they give away the money to the insurance firm.

At the same time, the company gets an assured sum of money for the entire coming year as well as lesser resources to be used.


As we discussed the 7 important factors that determine the rates of life insurance premiums, we realize that the ‘normality of life’ is an important aspect which is particularly demanded by life insurance companies.

All of these factors have different roles and impacts in deciding the cost of premiums.

When you go on to find the most suitable life insurance policy for yourself, do not forget to do a comparative analysis. Different companies view the above factors in a different light.

For example, if you are into a high-risk profession such as piloting, you may be considered highly risky by company A but company B may regard your endeavors as gallantry and not ask you to pay very higher prices.

This entails you to do a performed market research considering your case particularly. Also, do not forget to find about the company details, its history of existence, credibility, past years; performances, customer experiences, and reviews etc.

Buying life insurance is not only about our personal savings, but it is also a bid to safeguard the future of our loved ones who will survive after our death.

Therefore one must be very careful in selecting the right kind of policy and the firm to associate with. The professional firms always look into the best interest of their customers and help you in reducing the prices of your premiums through their suggestive measures.

Linda Chavez

I'm a burial & senior life insurance expert, independent agent, Founder & CEO of Seniors Life Insurance Finder. I have been working in this sector since 2004 and established my own company in 2014. I have a team of seven members, and we are trying hard to share the knowledge we've gathered. We know how difficult often it is to find an affordable policy. Hence, we are doing our best to help you.