What are three factors that affect the cost of life insurance?

Key takeaways:

• How much you pay for life insurance can depend on your age, gender, and health status. 

• As you get older, your life insurance premiums can increase. You’ll typically get a better rate on life insurance when you are younger and healthier. 

• If you wait until you’re over 55 to get life insurance, your monthly premiums can range from $100 to over $1,000. 

Many people put buying life insurance on the backburner because they believe it’s too expensive. But a recent survey shows that half of Americans overestimate the cost of life insurance by three times. Depending on your age, health, and other factors, life insurance can be less than $200 per year.  

How much does life insurance cost?

A life insurance plan can ensure that your family is able to pay for critical expenses after your death. You can boil these plans down to two main types: term and permanent. Which type you purchase, along with your risk factors, will determine the exact amount you pay for life insurance. 

What factors affect the cost of life insurance?

The amount you pay for life insurance can depend on many factors. Below, we review the 10 most common.

1. Type of policy 

Term life insuranceis typically cheaper than permanent life insurance. For example, if you are 45 and female, a permanent policy can easily be 10 times more expensive than a term policy. However, term policies expire, which can lead to higher premiums when renewing or even being denied coverage because of age or health issues.

Term insurance is typically more affordable because it only lasts for a fixed period of time, say 10 years or 20 years. Permanent insurance policies — which include whole life, universal life, variable life, and variable-universal life — do not expire during a policyholder’s lifetime as long as required premiums are paid. These policies also come with cash value benefits in addition to a death benefit, which is what the company pays to your beneficiaries upon your death. 

If you choose a no-exam life insurance policy, your premiums will usually be more expensive. The insurance company takes on a higher risk with this kind of policy, since it has less health information to estimate life expectancy.

The death benefit associated with your policy will also impact the cost. The higher the death benefit, the more you will pay in monthly premiums. If you are 45 and female, you can expect to pay around $60 a month for a $250,000 death benefit with a term policy that lasts 20 years. That’s compared to about $100 a month for a $500,000 death benefit and a 20-year term policy.

2. Age

Your age determines how much you pay for life insurance premiums. As you get older, your insurance premiums increase. This is because your life expectancy gets shorter and you’re more likely to have health problems. 

3. Gender

Women generally pay lower premiums because they have a longer life expectancy than men. In 2021, the life expectancy at birth for women was approximately 79 years in the U.S. For men, it was approximately 73 years. Insurance companies account for the fact that they will likely need to pay claims for male policyholders sooner by adjusting premiums.

If you’re 25 and female, you can expect to pay about $21 a month for a 20-year policy with a $500,000 death benefit. This compares to almost $27 for a male policyholder. Some of the reasons that men have a lower life expectancy are that they usually have more dangerous jobs, engage in riskier activities, and see doctors less often than women. 

The price differences for female and male policyholders increase with age. For example, if you are 55 and female, your monthly premium will be about $108 for a 20-year policy with a $500,000 death benefit. But a 55-year-old male can expect to pay about $150 for the same policy.

4. Family health history

Certain diseases are hereditary or genetic. This means there is a higher probability of a person getting the disease if one or more of their family members has it. Insurance companies may take this into account when costing life insurance policies. If a person has several family members who died of a disease, this is even more likely. 

Here are some of the conditions insurance companies may ask about when assessing a potential policyholder’s family health history: 

• Breast cancer 

• Colon cancer

• Diabetes

• Heart disease

• Kidney disease

• Liver disease

• Lung cancer

• Prostate cancer

• Substance misuse

5. Personal health history

If you have one or more chronic health problems that could shorten your life, your life insurance premiums will generally be higher. Insurance companies will likely require you to fill out a health questionnaire and take a medical exam to learn more about your health status. 

The questionnaire may include queries about: 

• Tobacco use 

• Medical history 

• Disabilities 

If you need to take a medical exam, the health professional conducting it may gather information related: 

• Blood pressure and pulse: This information can point to hypertension, which can lead to problems like heart disease.  

• Blood tests: This includes tests that measure cholesterol, triglyceride, and glucose levels and a thyroid panel.

• Electrocardiogram (EKG): If you have a history of heart problems or are older than 50, you could be given an EKG, which checks the electrical patterns of the heart.

• Urine test: A urine test can help detect diabetes, kidney disease, and liver disease.

As for COVID-19, there is little evidence that insurance companies have used vaccination status to determine the cost of premiums. 

6. Body mass index

Before you’re quoted an amount for a life insurance policy, your height and weight will be used to calculate your body mass index (BMI). If you have a high BMI, this could raise your chances of certain health conditions, like high cholesterol. If a person has a BMI over 25, which is considered overweight, for instance, they have a higher chance of having high blood pressure or diabetes.

Health concerns associated with higher BMIs can mean paying higher premiums for life insurance. You can find out what your BMI is by using an online calculator, or a medical professional can provide you with the number.

7. Lifestyle and hobbies

An insurance company will ask you questions to get a better idea of your lifestyle. If you do activities that are deemed risky or that could lead to accidental death, that may affect your premiums. Like with gender, insurance companies consider the likelihood of paying out a claim sooner than expected for someone with a risky lifestyle. 

 Insurance companies may increase premiums for the following activities:

• Racing cars

• Hang gliding

• Rock climbing

• Scuba diving

• Skydiving

8. Occupation

Not all jobs are created equally in the eyes of insurance companies. When calculating monthly premiums, insurance providers may increase rates for people who have jobs that are considered dangerous. 

The U.S. Bureau of Labor Statistics provides a list of the most dangerous jobs, which are among those that could lead to higher premiums:

• Aircraft pilots and flight engineers

• Construction workers

• Driver/sales workers and truck drivers 

• Roofers

• Structural iron and steel workers

9. Riders and policy terms

A rider is an optional benefit you can add to your life insurance policy to cover life events that your standard policy does not cover. Here are common ones:

• Waiver of premium: This comes into effect if you become disabled. In that case, you will not have to pay the premiums to maintain your policy.

• Accelerated death benefit: If you develop a terminal illness and you have this rider, you will receive your policy’s death benefit while you’re still alive.

• Accidental death rider: In the case of your accidental death, your beneficiaries would typically receive twice the amount of the death benefit with this rider. This covers car crashes, crime-related deaths, and slip-and-fall accidents, among other things.

You can have more than one life insurance rider and some may be included for free. One that is often included for no charge is a term conversion rider. This rider allows you to turn a term insurance policy into a permanent policy.

10. Tobacco use

The life expectancy for smokers is 10 years shorter than for non-smokers. And smoking causes roughly 1 out of 5 deaths in the U.S. every year, which equates to 480,000 deaths annually. This is why life insurance premiums are higher for people who smoke.

Smoking cigarettes, chewing tobacco, using marijuana, and vaping can lead to health problems. If you stop smoking, you can ask your insurance company how long you need to wait to get a rate adjustment. 

The bottom line

The cost of life insurance can rise depending on your age, gender, health status, cccupation, and other factors. The type of policy and death benefit you choose can help you reduce your costs. And there are also lifestyle changes that can lower your bottom line. This could mean quitting smoking, losing weight, or not engaging in risky activities like racing cars and skydiving.

GoodRx Health has strict sourcing policies and relies on primary sources such as medical organizations, governmental agencies, academic institutions, and peer-reviewed scientific journals. Learn more about how we ensure our content is accurate, thorough, and unbiased by reading our editorial guidelines.

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What factors affect the cost of a life insurance policy?

What are some factors that affect the cost of the premium?