Affordable Life Insurance Protection for Your Family

How Life Insurance Premium is Calculated?

Learn How Premium is Calculated on Life Insurance


How is Life Insurance Premium Calculated?

How is Life Insurance Premium Calculated?

Life insurance is expressed as a rate per $1,000 of insurance coverage. To calculate your life Insurance premium, you take the benefit amount per $1,000 of coverage, multiplied by the monthly rate.


Premium Example: 

$3 rate on $500,000 life insurance policy = $3 X $500 = $1,500 annual premium.


How Do I Calculate My Premium for Life Insurance?

You can get instant life insurance price quotes online from a life insurance quote provider.

You just visit a quote provider, answer some basic questions, and instantly receive the lowest life insurance rate quotes from a network of leading life insurance companies. 

What Will Determine My Premium for Life Insurance?

When calculating premiums for a term life insurance policy, life insurance carriers consider several risk factors, as well as, the amount of life insurance and duration of your term life policy.


Several risk factors affect your premium, including your age, gender, health, family health history, occupation, hobbies, driving record, height-to-weight ratio, if you smoke or not, lifestyle, credit history, etc.

The amount of your life insurance also affects your premium, as well as, how long your term life insurance policy will last. Most term life plans provide coverage for a period of 10, 15, 20, 25 or 30 years. The longer the term for your life insurance policy the higher your premium.


How are Life Insurance Rates Calculated?

The primary unit for figuring out a life insurance rate is the rate per thousand (cost per $1000 of insurance), which can vary depending on which factors influence it (age, gender, etc). 

For example, if the rate is $0.20 per $1,000 and an enrollee elects $15,000 in coverage, the monthly premium will be $3 ($0.20 x 15 = $3). 

Factors that Affect the Rate Per Thousand 

Rates can vary depending on the group's risk. With group policies, such as the ones provided through employers, the carrier has already taken into consideration the risks associated with the group and calculated a rate for that group. 

Some Common Risk Factors Include:

  • Age 
  • Gender
  • Occupation
  • Location

Once the rate is established for the group, it can either be one rate for all enrolled or there can be age-bracketed rates.

Age-bracketed rates establish different rates for coverage based on age, even though the enrollees are in the same group - for example, an enrollee over 65 might have a higher rater than an enrollee under 65, despite being enrolled in the same plan.


Key Factors That Influence How Life Insurance

Premiums are Calculated


Personal Risk Factors

  • Age – Rates are based in part on your age. The older you are when you purchase a policy, the higher your rate.
  • Gender – Women live longer than men in general, which is why they pay lower rates on life insurance.
  • Weight and Height – If you are overweight or obese, you will be charged a higher rate for your coverage.
  • Occupation – People with a high-risk job will be charged a higher rate for coverage.
  • High Risk Hobbies – Higher rates are charged to insure people who take part in high risk hobbies; such as, B.A.S.E. jumping, skydiving, race car driving, mountain climbing, etc.
  • Debts – People with a bankruptcy or poor credit would be considered a higher risk and pay a higher rate for life insurance.
  • Medical History – If you have a history of health issues, your rate will be higher than the standard rate for life insurance.
  • Marital Status – Some insurers offer lower rates for people who are married, because marriage can be a stabilizing factor and lead to a longer life.
  • Smoking and Alcohol Consumption – Those who drink and or smoke regularly will have a higher risk of health issues including heart disease, so they would pay a higher rate for life insurance.
  • International Travel – Regular travel to high risk third world countries may increase your risk of an early death, so the insurers would likely charge a higher rate for your coverage.


Life Insurance Policy Related Factors

  • Whole versus Term – Rates are usually much lower for term life insurance policies than whole life because term is temporary, and many people may outlive the duration of their coverage.
  • Life Insurance Policy Riders – Riders are additional coverage added to life insurance policies providing insurance for spouses and/or children. Some riders require an additional premium charge.



To get the best coverage at affordable prices, make sure to take the time and effort to research plans and insurers online. This will help you learn how insurance premiums are calculated, and find life insurance coverage that meets your specific needs. 


Like any type of insurance, the amount you pay for life cover depends on a number of factors. 

Understanding what these factors are, and how they interconnect with each other, can help you take steps to reduce your premiums.

Amount of Life Insurance Protection Needed

When you take out a life insurance policy, you decide how much cover it is going to provide for your familyin the event of your death.

There are various issues to take into account when choosing the amount of coverage you need:

  • Do you want the policy simply to pay off your mortgage if you died, so your family could continue living in your home?
  • Or do you also want other debts, such as credit-card bills, to be covered? 
  • What about your own income?

As you would expect, the higher the level of cover you choose, the higher your premiums will be.

Decreasing Payouts

The size of your premiums also depends on whether you choose to have a fixed level of cover for the duration of your policy, or if you opt to have the amount of protection decrease year after year.

For example, if the life insurance is designed to cover your mortgage, the balance of your outstanding loan will fall every year as you make repayments. 

That means you won’t need to have a fixed level of life cover, and your premiums will be lower as a result.

Duration of Coverage

If you choose a life insurance policy that covers you until you die – a whole-of-life policy – your premiums are likely to be higher than if you opt for term insurance, a policy that only covers you for a fixed period, say 25 years.

Premiums on whole-of-life policies can rise (after a certain period of typically 10 years, when they are fixed), and may be based on any subsequent health problems, so they could end up being quite expensive.

Term insurance is likely to be cheaper, but can still offer you protection while you have an outstanding mortgage, or while your children are still at home or going through university.

Status of Your Health

If you have any existing health problems when you sign up for life insurance, these are likely to push up the cost.

Failing to reveal any medical conditions in your application could result in the policy being rendered null and void, or in the insurer refusing to pay out if you do die.

Lifestyle factors may also push your premiums up: for example, if you are a smoker, or if you are seriously overweight; and also, if you have a risky occupation, such as an oil rig worker or fireman.

Your Age

The younger you are when you sign up for life cover, the cheaper policies will be - other things being equal. 

This is because older people are closer to the end of their lives, thus increasing the risk of the insurer having to pay out during the policy’s term.

As an example, a pensioner may have to pay a large premium for a lesser amount of cover against a 25 year old with more cover.


Life Insurance Premium Calculator

You may receive a range of estimates when using an online life insurance premium calculator.

That’s because there are many factors that influence how much you’ll pay for a life insurance policy.

You can discover what those factors are right here.

Let’s start with a basic understanding of life insurance.

Purchasing a life insurance policy is a contract between you and your insurance provider. You pay a monthly premium to guarantee the provider pays an agreed upon amount to your beneficiaries.

Factors When Using a Life Insurance Premium Calculator

The premium you pay per month for life insurance depends on many factors, including whether you’ve selected a whole or term life insurance policy.

Here are the Six Major Factors That Influence the Cost of Your Policy:

  • Age
  • Income
  • Mortgage and other debts
  • Ages of your spouse and children
  • College expenses for your children and/or spouse
  • Funeral expenses

Your answers to the items listed above will influence how much you pay in monthly premiums.

On average, you will typically pay more in premiums as you age, if you smoke, if you engage in dangerous activities (e.g. skydiving), or if you have health problems.

By considering these factors, insurance providers can give you a premium rate that can help ensure your beneficiaries’ financial future.

To find an estimate of what your monthly premium might be, you can check out a life insurance premium calculator. This calculator will ask you specific questions that can help estimate your premium.


What Type of Risk are Life Insurance Companies Interested in Insuring?

Basically, the same risks we are all concerned about with our health and longevity. 

Subjects we hear discussed each day on the news and in newspapers and magazine articles: 

  • High cholesterol, smoking, chewing tobacco, diabetes, being overweight, HIV, and other illnesses and diseases related to poor health and causing early death.

In considering these risks, the life insurance company selects a grade or status relating to your health. These ratings include: Preferred risk, Standard risk, Super Preferred risk, among others. 

These health ratings are based on your gender, health and age. These ratings also determine the rate or premium you will pay for your life insurance policy. 

Obviously, the better health you are in, the lower your rate would be compared to the person (the same age) in average or poor health. That’s because you have a lower chance of dying prematurely.

Several risk factors considered in determining your insurance premiums are not in your control. Those factors include your gender and your age. 

National Underwriting Studies show that because women tend to live longer than men, women pay less for the same amount of life insurance as men.

Your age also has an effect on how much you pay for life insurance. The older you are the more likely you are to die, so you pay more for a new life insurance policy at an older age, than a younger person.

Your lifestyle (risky hobbies or frequent travel to high risk areas with disease or war), your family medical history, and your physical health are key factors in determining your life insurance premium. The greater the risk for each of these factors, the higher your premium.

Usually, the insurance company will ask about your health and require you to take a medical exam. They’ll check your height, weight, blood pressure, vital signs, and take blood and urine samples. Blood and urine are checked for disease, including HIV, hepatitis, high cholesterol, cancer, kidney problems, diabetes and other health problems. Also, screening for nicotine, medications and illegal drugs are performed.

Each life insurance carrier sets its own life insurance rates and decides what individuals fit into the preferred, super-preferred and standard risk classes for rating purposes. If you do have a special health risk there are insurance companies that specialize in offering life insurance for specific health problems.

If you have a health problem you can address it: Stop smoking, take medication or lose weight. Start eating better. You can improve your health and lower your life insurance premiums.

If you give evidence of considerably improved health to your life insurance company, they may decrease your life insurance premiums. Keep this in mind.

Some life insurance companies will change your risk rating and lower your insurance premiums if your risk factors get better over time. 

It pays to improve your health. You live longer and you pay less for your life insurance.


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