The Truth How Life Insurance Premiums Are Calculated In 2024

Navigating the complexities of life insurance can often feel overwhelming, but gaining insight into how premiums are calculated can empower you with knowledge and confidence.

With this in mind, we’ve crafted an informative guide that demystifies the process of calculating life insurance rates.

By exploring this article, you’ll gain a deeper understanding of the various factors that influence your premiums.

So, the next time you discuss your policy with an agent, you’ll be equipped with the right questions to ask, ensuring you make the most informed decisions about your life insurance coverage.

When buying life insurance coverage, whether it be final expense/burial insurance, term, or universal life, one of the things that we often overlook is the price of the plan.

Perhaps it is because we do not have control over how it is determined or maybe we simply don’t have the time to stress ourselves over something that we cannot change.

After all, the insurer has already set out the payable premiums and all we have to do is either reject or accept the terms.

The truth is that understanding how your premium is calculated and the factors considered when calculating the rates will enable you to adjust those factors that you can control, so as to lower the rates applicable to you.

Additionally, having insight into how your insurance premiums are determined will enable you to accurately plan for both your long-term and short-term goals. If all of the above doesn’t concern you, then maybe, just knowing what you are looking at in your premium calculations may spark your interest.

How Is a Life Insurance Premium Calculated

There are several factors that are considered when calculating life insurance premiums and they can be categorized into three major groups that are; personal factors, policy-related factors, and insurer-related factors.

So there is no surprise that a senior over 80 would have higher premiums. Read along for more details on this!

Decreasing payments –one of the most crucial things that determine how your life premium is calculated depends on your decision to either adopt a payment structure where the quantum of protection reduces every year, or opt for a fixed-rate kind of plan, for the entire policy coverage period.

Term or whole – Another factor that has a major impact on how your life insurance premium is established, lies in the type of life policy you choose. For instance, a whole life policy that offers you coverage for the rest of your life normally comes with a significantly higher premium compared to the term insurance cover. Term policy features a fixed-term duration which could be 30, 20, or even 10 years.

What Personal Factors Determine Your Life Insurance Premium


it has been noted that women seek treatment more easily compared to men, and therefore, they are more likely to be diagnosed with potentially fatal conditions at an early stage hence minimizing the risk of death. They are therefore offered more favorable life premiums.


it is recommended that you purchase a life insurance policy when you are still young since the younger you are the lower the premium and vice versa. Young individuals are healthier while older folks are more susceptible to diseases

Height and Weight

life insurance providers also look at height and weight so as to determine your body mass index (BMI). This is vital in assessing your fitness and general health. Obese persons are highly likely to experience weight-related conditions that influence how life premiums are computed.

Medical History

this is both individual and family history. Your past health conditions and experiences are a critical factors in the computation of a life insurance policy. Your health conditions (current or older), your family disease history, and medical disorders are some of the determining factors. Having said that, the degree to which your medical history impacts your premium calculations relies on the magnitude or severity of your past illnesses, or the medical condition you are currently suffering from.

For example, if you can demonstrate that you are completely cured of a serious medical condition such as cancer, or prove that you are properly managing your chronic condition such as diabetes, then the insurer may consider lowering your premium.

However, this is completely dependent on the type of insurance you are applying for and the insurance company. For example, there are some insurance providers that don’t offer insurance to people with a history of cancer, unless they demonstrate that they’ve been in remission for a period not less than 5 years.

Marital status

This is another factor that has a significant impact in the processing and computation of your life insurance premiums. If you choose to take a life insurance policy as a couple, the policy terms of service is slightly different from an individual policy application in that the policy works based on the first death principle. This means that the insurer will not give payouts for the second partner’s death.


There are some jobs that are considered riskier than others and this is also factored in when computing life policy premiums. People who work in gas industries or offshore oils, anglers, soldiers, pilots among other high-risk industries are more likely to pay a higher premium compared to other ‘less risky’ occupations such as those working in schools, shops, and offices.


Any loan balance or other unresolved debts such as credit cards bills, mortgages, among others are major determinants of the amount of coverage you require.


the number of children/dependent is a factor determining the magnitude of protection you are qualified for. The more the dependents, the more the life insurance premium you’ll be required to pay.


this is needed to establish your capabilities of regular premium payments.

Important Insurer-Linked Factors That Affect Life Insurance Premiums

Interest – Insurance providers normally invest the premiums paid by the policyholders in real estate, stocks, bonds, among other investment products with the assumption that a certain percentage of interest will be gained. Interest is one of the factors that are considered when computing life coverage premiums.

Operating cost – the operating cost incurred by the insurance firm such as rents, salaries, marketing fees, legal fees, maintenance, agent commission, among others, has an impact on the kind of life cover it offers and how its premium is computed.

Mortality cost – this refers to the funds paid to the policyholders by the insurance firm.

What to Do to be Considered for Low Premiums

From the above factors, you’ll realize that calculation of life insurance premium is pegged on risk assessment. The more the risks, the more the premium, but the good news is that there are several ways you can adopt to minimize the premiums.

One way to do that is by bundling your insurance. For instance, if you have life, auto, and home insurance under one insurance firm, you are more likely to be considered for a discount or even lower premiums.

Another way of lowering your premium is by changing your lifestyle though this will require a lot of commitment from you. You see, some states usually charge cigarette smokers up to 50 percent higher than non-smokers for health and life insurance policies.

What this means is that if you are a smoker paying a life insurance premium of around $600 per month, you can easily minimize it to $400 per month if and only if you can quit smoking.

Other ways include improving your credit score by paying your debts on time, apply for life cover early when you are still young and your risk probability is low, and lastly improve your health by exercising and keeping fit – lose weight.

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Whether or not you improve your credit score, quit smoking, or bundle your insurance, it is always wise to shop and compare insurance first before buying the policy.

By doing so, you’ll be able to get the best deal on the market.

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