What factors affect the cost of life insurance?

10 minutes

Life insurance is an important financial product for anyone who wants to ensure they leave money for their loved ones, to make sure they don’t face financial hardship after they’ve passed away

There are a few factors which can impact the cost of life insurance cover

As long as you continue to make your monthly payments (called premiums), some policies run until you die and pay out no matter what age you pass away, others are designed to pay out a lump sum if you die before the end of the policy term.

Having life insurance in place gives you peace of mind that your loved ones will be taken care of financially after you die. This includes having money to pay for the mortgage on your home, childcare costs or even your funeral bills.

However, no two policies are the same. No matter what level of cover you choose, the amount you pay for your life insurance can differ from what someone else pays. The reason is simple – there are a number of factors insurers consider when pricing up your life insurance.

Below, we explore some of the factors at play and look at how a life insurance premium is calculated.

Why does life insurance price differ?

Life insurance is specific to you, your lifestyle and needs. So the price you can expect to pay depends on how old you are, what you do for a living, your hobbies and leisure activities, your medical history, whether or not you smoke, and sometimes even your driving history. 

The price of life insurance can often differ between providers too. This is because your insurer will use their own system to calculate your perceived risk, based on the many factors they take into account. 

For example, a healthy person in their 20s may be seen as a lower risk, who will likely make more payments before a claim is made (if the policy only runs for a set number of years). This is compared to someone in later life with long-term health concerns.

How is life insurance calculated?

Most insurers will look at several factors when calculating the cost of your policy. This includes various aspects of your health and lifestyle (including whether you smoke), as well as practical information such as the type of cover you want, the amount of cover and how long for. 

Payout amount

The amount you choose to be covered for will significantly affect the cost of your monthly payments (usually called premiums). As a general rule, the higher the cover amount you choose, the higher the price of your policy.

So, for the same person a policy with £300,000 death benefit coverage will have higher premiums than a policy with cover of £100,000, for example.

Policy type

There are two main types of life insurance policy: term life insurance and whole of life insurance. The former will only run for a specific amount of time (or term) and you won’t receive anything if you die after this period has ended. Meanwhile, whole of life insurance does not have an expiry date and will continue to run until you die or stop the payments. 

As expected, the longer you take out cover for, the more you’ll pay in premiums overall. You may also decide to add additional coverage to your policy, which can increase the price, such as critical illness cover.

Your age

Age is one of the main factors your insurer will look at when calculating your policy. In most cases, the older you are, the higher your premiums will be. This is because the older you are , the earlier it is that the insurer will need to pay a claim under your policy. 

If you decide to take out life insurance at a younger age, the insurer can be fairly confident that you’ll be making payments for a number of years before they need to pay out. For this reason,  they may charge lower premiums.

Your health

Your health plays an important role in calculating your policy price. In general, the healthier you are, the less you’ll have to pay. This is because someone with a clean medical record poses less of a risk of dying early than someone who is a heavy smoker with some pre-existing medical conditions. 

Many insurers will look through your medical records and ask for basic information such as your height, weight and blood pressure. Some may also ask you to take a medical exam to check your current health.

Family health history

In addition to your health records, insurers will often want to know if you are more vulnerable to certain conditions due to genetics. 

If you have a family history of health problems such as strokes, heart attacks or diabetes, you may end up paying higher premiums. This is to cover the insurer should you develop these conditions, especially if they resulted in your family members dying at a young age (typically under 65).

Habits and lifestyle

Alongside your general health, your insurer may want to know if you have any habits that could impact your physical condition. This could include whether or not you drink alcohol and if so how much you drink, whether you smoke and even if you have any points on your driving licence. 


Some occupations are seen as more dangerous than others, so can often come with a higher price. Those who work in offices are generally not affected by this. But if you work in the armed forces, construction or the emergency services, for example, you may be seen as a higher risk and may face higher premiums as a result.


It’s not uncommon for your insurer to ask you about your hobbies outside of work. This isn’t to get to know you better, but rather to assess if your lifestyle could pose as a risk to your policy. 

If you have a lot of dangerous hobbies, like rock climbing or skydiving, or have a keen interest in extreme sports, it may result in higher premiums. 

Life insurance price FAQs

How can I lower the price of life insurance?

There are various ways you can lower the price of your life insurance premiums, including:

  • Taking out life insurance at an early age.
  • Opting for a healthier lifestyle, such as giving up smoking.
  • Only insuring yourself for what you need.
  • Comparing insurers to find the best deal.

Does income affect life insurance?

In most cases, your income won’t affect your life insurance premiums.

What is occupational risk?

Occupational risk is the likelihood you’ll be injured or fall ill at work. If you work in an office setting, your occupational risk is usually considered to be low. Whereas those who work in the construction industry, for example, may be considered a higher risk due to their exposure to workplace hazards such as working at heights or underground, moving objects, asbestos and loud noises. 

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