While our site doesn’t feature every company or financial product on the open market, we believe everyone should be able to make great financial decisions with the utmost confidence. The guidance we offer, the information we provide, and the tools we create are objective, independent, straightforward — and free.

So how do we make money? Our partners compensate us. This may influence what products we write about and review and where on the site we put them. In no way does this affect our recommendations or advice, which are grounded in many hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services. Here is a list of our partners.

What is a Life Insurance Premium?

Life insurance is more than just a financial tool, it’s a crucial pillar of security that provides your loved ones with peace of mind. But have you ever wondered how life insurance premiums, the backbone of this security, are determined? In this article, we will explore the concept of life insurance premiums and what factors influence their calculation.


A life insurance premium is how much you pay regularly to maintain your insurance policy. The premium amount is determined based on various factors, including your age, health condition, lifestyle choices, and the coverage amount you choose. For instance, a 30-year-old non-smoker with a $ 500,000 policy might pay around $ 30 per month, while a 50-year-old smoker with the same policy could pay over $ 200 per month. Insurance providers also consider their calculations, such as mortality tables and administrative costs.

Understanding how life insurance premiums work can help you make informed decisions when buying a policy. By considering your specific needs and circumstances, you can find a premium that aligns with your budget while providing the coverage you require. Additionally, there are strategies you can use to lower your life insurance premiums, such as maintaining a healthy lifestyle, quitting smoking, and comparing quotes from different insurers.

Join us as we dive into the ins and outs of life insurance premiums and demystify this essential aspect of life insurance. Let’s ensure the financial protection of your loved ones is backed by a premium that is tailored to fit your unique situation, because we understand that one size does not fit all.




What is a premium in insurance

what is a premium in insuranceLife insurance is paid through premiums, and you get to choose the most convenient time to pay for it. Policyholders can choose from monthly,bi-annually, annual payments. Hence, it is crucial to ensure not to miss any payments to keep your policy active. In the case of missed payments, the policy will lapse.

Purchasing life insurance means that you are getting coverage to safeguard your family’s future in case of an untimely death. Payments are known as premiums. It keeps the policy active until the time when your family needs to claim the death benefit.

A premium insurance company sets the amount of premium, and it’s based on several factors such as age, health status, length of coverage type, and add-on or riders. After signing a policy and payment of the first premium, the coverage is set for the policy’s entire term.

Important Takeaways

  • There are six crucial factors to remember that will set premium rates such as age, type of policy, length, health, and additional feature
  • Life insurance policyholder can choose from monthly, bi-annually, or annual premium payment
  • Premiums paid for life insurance is tax-free

Types of Life Insurance Policies

Life insurance policies come in various forms to cater to different needs and preferences. Term life insurance, a straightforward policy, provides a sense of security by offering coverage for a specific period, such as 10, 20, or 30 years. This type of policy, often more affordable than whole life insurance, ensures a death benefit if you pass away during the term. On the other hand, whole life insurance provides coverage for your entire life and includes a cash value component that grows over time. This policy offers lifelong protection and can also serve as an investment vehicle.

Universal life insurance is a flexible policy that combines the benefits of term and whole life insurance. It allows you to adjust your premium payments and death benefits throughout the policy’s term. Variable life insurance offers investment options within the policy, allowing you to allocate funds to different investment accounts. This policy’s cash value fluctuates based on the performance of the investments. It’s crucial to understand the types of life insurance policies available, as this knowledge can empower you to choose the one that best fits your financial goals and circumstances.

Coach B. Insurance logo

Compare the market, right here.

Coach B. saves you up to 60% by comparing the top-rated companies on our quote and apply platform.

Factors That Determine Life Insurance Premiums

Life insurance premiums are what are the elements of life insurance premiumscalculated based on several factors that help insurance companies assess the risk of insuring you. Age is a significant determinant of your premium, as older individuals are generally considered higher risk. Health status also plays a crucial role, with healthier individuals typically qualifying for lower premiums. Lifestyle choices, such as smoking and participation in high-risk activities, can also impact your premium amount.

The coverage amount you choose is another critical factor in determining your life insurance premium. Higher coverage amounts will increase premiums as the insurance company takes on a greater financial risk. Additionally, the type of policy you select, such as term or whole life insurance, will influence your premium. Insurance providers use actuarial calculations and mortality tables to assess these factors and determine an appropriate premium amount that reflects the risk associated with insuring you.

Life insurance premium calculator

life insurance premium calculatorA life insurance premium calculator is a tool insurance companies provide to help individuals estimate the cost of their life insurance policy. By entering information such as age, gender, health status, coverage amount, and policy type, you can receive an approximate premium quote. Premium calculators help compare different policy options and understand how various factors impact the cost of insurance. They can also help you tailor your coverage to fit within your budget.

How to determine life insurance premium rates?

There are many factors to consider when setting the life insurance premium rate.

1. The Type of Coverage

As mentioned a while ago, the whole life policy does not have an expiration. Therefore, it is active as long as you are alive and paying the life insurance premium. Aside from that, it has an added cash value feature that may gain or lose values overtime. The cash value is beneficial in case you need cash for emergency purposes.

It maybe takes out as a loan. That is why the premium paid for whole life is 5 to 15 times higher than term life. The term life has the cheapest premium and the best option for many.

2. Amount of Coverage

Comprehensive life insurance coverage will surely cost higher. The higher the amount of coverage, the more premium you need to pay.

3. Length of Policy Term

More extended policies like whole life, which is permanent, have higher premiums. It is because you are covered for a lifetime even if you develop a health condition later in life.

4. Age by the Time of Application

Premium rates tend to get higher as they get older. So, the older you set your mind to getting life insurance, the higher your premiums will be.

5. Other Risks Factor (hobbies, habits, job, credit score)

How risky you are as a policyholder adds up to premium rates. For instance, your family health history and your medical exam result may influence the amount of premium. Also, driving record, risky hobbies, jobs, and bad habits play a significant factor in determining the premium amount.

All of this information is essential for insurers during the underwriting process. The underwriters will do a thorough background check to know your premium.  

6. Riders and Add-ons

Riders are added features into the policy to make the coverage more valuable to the policyholder. Some insurers may offer free riders as part of the policy, but most riders will increase premium rates. Some of these riders are:

Compare and buy life insurance

Life insurance premium cost vs. Life quotes

life insurance premiumsQuotes and premiums are related because quotes estimate the premium provided by life insurance providers or brokers. It is essential information for someone who is applying for a policy. Also, during the application process, the client will have a rough idea of what he/she may need to pay in the future.

On the other hand, the premium is the insurance provider’s price right after the underwriting process, and it is the exact amount that you should pay for the entire duration of the policy.

There are two vital stages for a quote to become premiums. First is the premium quote and the final step is the actual premium.

Stage 1: Online Quotation
There are two ways to acquire an online life insurance quotation. The first is directly from an insurance provider of your choice. The second is from an independent insurance company like Coach B. Quotes will give an estimated premium based on your personal information.

There are a series of questions that you should answer regarding your family history, health status, age, driving record, etc. Questions depend on the insurer. After providing an accurate answer, we will calculate your premium.

The quotation that you will get is as accurate as your information. That is why giving detailed and truthful information is vital. Therefore, the more information you provide, the more precise the result will be.

Stage 2: Phone Interview
The amount from the online quotation is not the final premium. It is vital to go through the second stage, which is the phone interview.

At this stage, you must talk to an agent, and most insurers require a phone interview. The agent will ask detailed questions to see the complete picture of your health condition, and additional information you will provide from the consultation may change the estimated quotation.

Remember not to keep information about your health and answer all questions honestly. Afterwards, the agent will share the updated quote.

The agent will set up a medical examination for free or request previous medical records and documents from your attending doctor. Aside from that, the agent may ask for the attending physician statement or APS.

In case you have answered truthfully during the interview, and there is no added information from your medical record and exam. Your application will be approved at a very close amount from the phone call interview.

Stage 3: Underwriting Process
The last stage of the process is underwriting, wherein the underwriter will thoroughly review all your records like medical exam results, application forms, and other documents. It will determine your insurance classification and rates.

After your classification is set, detailed of the policy may not be, you still have the opportunity to decrease the term or the death benefit to lower down the premium rate.

After signing all paperwork and paying for the first month’s premium, then your policy is set and remains constant across its duration.

Are life insurance premiums tax-deductible?

life insurance premiums tax-deductiblePremiums paid are not tax-deductible, and there are some advantages when it comes to the death benefit. Most of the time, death benefits are tax-free. However, there are exemptions, like if your employer is the one paying for premiums from a group life insurance policy.

Death benefits from this type of policy are subjected to taxes. Another scenario is if the death benefit is paid through your estate instead of an individual beneficiary. The estate itself is subject to taxes.

What will happen in the case of unpaid premium?

If you cannot pay the monthly premium because of unforeseen circumstances, the insurer usually provides a grace period of 1 month. It is the time provided by the insurer to give you enough time to recover and pay for miss premium before they cancel the policy. An extension is possible for exceptional cases, but it still depends on your insurance provider.

For instance, most life insurance providers are extending their grace period up to 60 to 90 days during this time of Pandemic. If you want to acquire an extension period, it is essential to contact your insurer and inform them about your current circumstance.

Tell the company how the situation has impacted your financial stability. Some insurers may require submission of documentation, but many providers approve extensions with just a phone call.

Moreover, if you ask for an extended grace period, you must set up a reasonable payment plan to pay back your miss payments.

Is it possible for the life insurance premiums to change?

Most term life insurance offers the same premium throughout your policy. It is called the level term life insurance, but another type is the annual renewable term life policy. It is not a common type of term life, and it provides a changing premium annually.

Furthermore, there is annual renewable life insurance with a one-year term. The policyholder has an option to renew the policy every year for a determined number of years. It is one of the cheapest types of coverage, but it might end up more expensive. Hence, if you develop a health condition or terminal illness, then you are not eligible for renewal.

Premiums are the core elements of any life insurance policy. That is why it is vital to understand its works, its means, and what it offers. Therefore, it is good to get a free life insurance quote today to determine how you can work out your budget to pay for the premium before toy apply. The amount of premium you will pay for the coverage is worthy of the peace of mind knowing that your family is secured.

Frequently Asked Questions

How is life insurance premium determined?

Life insurance premium rates are determined based on several factors, including the age and gender of the policyholder, the type of life insurance policy purchased, any health conditions or lifestyle choices (such as smoking) that could impact the risk of death, and the amount of coverage desired. Insurance companies also use algorithms to determine how likely someone is to file a claim to calculate their premium rate.

What's the right amount of life insurance for me?

The right amount of life insurance for you will depend on your family's specific needs and financial situation. Consider what debts must be paid off, how much money your potential beneficiaries will need to cover ongoing expenses – such as rent or mortgage payments, college tuition, and more – and how long they may need the support of a life insurance policy to recover financially after an unexpected death fully.

What does premium mean for life insurance?

The premium is a payment made by the insured party to the insurer for insurance coverage or policy. For life insurance policies, the premium payments are paid according to the length and amount of coverage elected. Generally, these payments are usually on a monthly, quarterly, semi-annual, or annual basis. The payment amount depends on age, gender, lifestyle habits, and other personal characteristics that indicate risk level.

Meet the team

About Coach B.

After starting his financial career with Phoenix Home Life Insurance Company back in 1992, Scott decided he wanted to provide people with an easier and more enjoyable way to buy life insurance. That was the start of Coach B. Life Insurance, whose mission is to be transparent, honest, and helpful to customers — without ever bugging or pushing them.

In the years since then, he has worked tirelessly to improve the process of shopping for insurance. His goal is to make sure that everyone who comes to Coach B. — whether they end up buying a policy or not — has the best possible experience.

More Articles


Send Us A Message