What is a life insurance premium and how does it work?

You probably have questions if you are thinking of buying life insurance. What policy type is best for you? What is the cost of this policy? How will I be able to determine my life insurance premium?

Understanding your life insurance premium will allow you to do two things: pay your policy off and keep it in force. Let’s take a look at how life insurance premiums are defined.

What is a premium for life insurance?

Your life insurance premium, in its simplest form, is the amount that you pay to your insurer for your life insurance policy. It is the same amount as your homeowner’s insurance premium and your car insurance premium. Your life insurance premium represents the cost of your coverage.

You’ll work with your life insurer to create a plan for when your premiums will be due. They might be liable for money each month, each quarter or all at once. Or you may have to pay the entire premium once a calendar year.

Your premium is important because you will have to pay it if your policy doesn’t work. This means that your beneficiaries will not receive any of the death benefits if you die. Even if you realize that you have missed a premium payment, you might not be able to make it up right away. Your provider may cancel your coverage if there is even one missed payment.

What are the life insurance premiums?

You may be curious about the cost of a life insurance policy premium. Your life insurance premium can be used by insurance providers for three purposes:

  • They can use it to cover their liabilities. The insurance providers must be prepared to pay claims. A life insurance company must pay the beneficiary’s death benefit, plus any policy perks, if an insured dies. To fulfill the agreements they made with their insureds, some of their premium money for life insurance is kept on hand.
  • You can use it to pay for business expenses. An insurance company costs money to operate. Your life insurance premium can be used by your insurance provider to pay salaries and office space.
  • Invest it. Insurance providers may invest a portion. These investments provide good returns that allow them to keep their insurance products’ costs as low as possible. Don’t worry, insurers must meet liquidity ratio requirements to ensure that they have enough liquid assets to pay out claims.

How are premiums for life insurance determined?

The premiums for life insurance policies can vary from one person to the next. Why? Insurance providers assess you before they give you life insurance policies. A higher risk level in life insurance means that you are more likely to die soon. This means that your insurer will likely have to pay your death benefit. Life insurance policies with lower premiums are generally offered to younger and healthier individuals.

These are the top factors that insurance companies consider when determining your premium for life insurance.

Types of coverage

There are two types of life insurance you can choose from: permanent and term.

Although term policies are cheaper, they have a shorter expiry date. Permanent policies are in effect for the rest of your life, but you pay a higher premium for this longevity.


The lower your life insurance premium, the earlier you purchase it. To see how much less your premium for life insurance could be if it’s purchased now, visit our breakdown by age. Here’s the takeaway: A policy will cost three times more for a 50-year old than a policy that would cost a 25-year-old.


Women live longer than men, so they are less likely not to die during the term of the policy. This means that the insurance company will be less likely to have the benefit to cover their death. Women usually pay lower premiums for life insurance.


A majority of life insurance policies will require a medical examination. This is the insurance company’s way to make sure that a preexisting condition doesn’t significantly shorten your life.

Your life insurance premium will be lower if you are healthier. You can manage your health to some extent. If you want to lower your premiums for life insurance, eat a healthy diet and exercise often.


Insurers consider your lifestyle a major factor in determining your risk level. A higher premium for life insurance will be charged if you own a motorcycle or are a fan of skydiving.


To increase your policy benefits, you can add riders to your life insurance policy just like with other policies. To cover long-term care costs later in life, you can add a rider.

Riders not only give you additional perks, but also increase the cost of your coverage.

Questions frequently asked

Which is the best life-insurance company?

It all depends on your needs, your budget, and what type of benefits you wish to leave behind for loved ones. Compare quotes from top coverage providers to find the best life insurer for you. This will ensure that you get the best life insurance policy at the lowest possible premium.