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The factors that decide what your life insurance will cost

Mon 06 Nov 2023

When it comes to life insurance, what you pay may be significantly different from your friends and family, even if you all have a policy with the same insurer.

So, what really goes into determining the level of your life insurance payments?


Your age when you apply for your cover will be a big factor in the cost of your policy. The older you are at the time of application, the higher your payments are likely to be.

It’s all a question of risk ‒ the older you are, the more likely it is that you will pass away during the term of your policy.


Your height-to-weight ratio is also a key indicator for an insurer. If you have a high BMI, then the higher the chances of you developing other health issues which could potentially shorten your life expectancy, for example, type two diabetes.

As a result, if you are overweight, your monthly payments may be more than if you were a healthy weight. It goes both ways though ‒ there may be an impact on the pricing of your policy if your BMI is too low, since this can also cause health issues.


Your medical history

Plenty of people develop health issues irrespective of their weight, from type one diabetes to asthma. But each of these issues could increase the likelihood of you passing away during the term of your policy, which means they will lead to a more costly premium.

It’s not just your own medical history that an insurer will want an insight into either; they will also ask you about your family’s medical history. It may be that while you have no signs of it currently, certain hereditary diseases are common within your family, which will have a knock-on effect on your pricing.


Do you smoke?

A significant factor in the price of your cover will be your smoking habits.

Smoking can lead to all sorts of health issues, from increasing the chances of getting a range of different cancers, to heart disease and strokes.

Insurers will ask you if you have used any nicotine or nicotine-replacement products in the last 12 months. If so, you are classed as being a smoker, and will most likely, face higher payments.

This means that if you are a smoker and manage to kick the habit successfully it will be worth discussing it with your insurer, or getting quotes for a new policy, as it may mean your monthly payments drop. 

Do you like a drink?

The insurer will also ask about your drinking habits. After all, excessive drinking can lead to certain health problems, particularly related to your liver. As a result, big drinkers may face increased life insurance payments.


Your Job

You might not expect your job to make much difference to your life insurance payment, but it is actually an important factor in determining the cost of your policy.

The thinking is pretty simple. Certain professions naturally bring a greater element of risk than others. For example, working in the Armed Forces is going to be more detrimental to your chances of reaching old age than working in an office. As a result, if you have a riskier occupation, then your policy may cost more.


Your hobbies

How you spend your spare time may also have an impact on the cost of your cover.

If you spend your weekends playing cards then, it won’t make much difference. But if you’re into extreme sports, for example, skydiving, then don’t be surprised if your payment increases.


Level of cover

The more cover that you want from your policy, the higher your payments are going to be.

Ultimately, there are all sorts of considerations that go into working out what level of cover you want. For example, if you have a mortgage, then you will generally want the policy to ensure the remainder of the loan is paid off should you die.


The type of cover

Life insurance comes in a host of different forms. With a level term policy, the payout your loved ones will receive in the event that you pass away will be the same. This is irrespective of whether you die in the first or last year of the policy.

However, with a decreasing term policy the payout drops over time. This is the sort of policy which may appeal to those with a mortgage, as the payout lowers as the outstanding mortgage does.
Because the payout drops over time, decreasing term cover tends to be cheaper.

Ultimately, there are all sorts of considerations that go into working out what level of cover you want. For example, if you have a mortgage, then you will generally want the policy to ensure the remainder of the loan is paid off should you die.

The term of your policy 

How long you’re covered for will also impact the cost of your cover. The longer the term of your cover, the more expensive your payments will be. While most policies are taken out over a fixed term, perhaps 30 or 40 years, it is possible to get whole of life cover.

As the name suggests, this ensures your loved ones will get a payout no matter when you die. Because of this certainty of a payout, the payments will tend to be higher than with a fixed term policy.

Written by John Fitzsimons

Personal Finance Journalist

Royal London Life Insurance starts from £7 per month and has Terminal Illness Cover included at no extra cost.

Find out more >


John Fitzsimons has been writing about money for more than a decade, as editor of the B2B magazine Mortgage Solutions and then personal finance website loveMONEY. Since going freelance, he has written for the likes of the Sunday Times, Forbes, the Mirror, the Sun, and Moneywise.

Type of article: Articles
Category: Protecting my family

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