10 Factors that Determine Average Life Insurance Cost

Life insurance provides protection for your family, giving them the money they need to pay for expenses after your death. That makes it a worthwhile investment, but only if you can make room for the life insurance cost in your monthly budget.

At Addition Financial, we work with members every day to help them plan for the future and achieve their financial goals. One question we are frequently asked is this:

“What factors affect life insurance rates?”

Understanding the factors that impact your life insurance rates is essential before you begin shopping for a policy. With that in mind, here are ten factors that can impact the average cost of life insurance coverage.

#1: Your Age

The first and arguably the biggest factor that impacts life insurance cost is your age. Life insurance underwriters use actuarial tables to determine your life expectancy. Statistically speaking, the younger you are, the less likely you are to die. In other words, youth translates to low risk for life insurance companies.

As you get older, the risk of death increases. It’s for that reason that older people may have difficulty getting term life insurance, which requires a medical exam and pays out only if the policyholder dies within the term. A person who is 65 years old and wants a 10-year term life insurance policy is far more likely to die within the term than someone who is 40 and wants the same policy.

#2: Your Gender

A second key factor in determining the cost of life insurance is your gender. That’s because, in general, women live longer than men. According to the Centers for Disease Control, the average life expectancy (from 2017) breaks down like this:

  • Women in the US are expected to live for 81.1 years
  • Men in the US are expected to live for 76.1 years

We should note here that due to a variety of societal and economic factors, life expectancy for Black and non-Hispanic black people is lower, coming in at 75.3 years and 74.9 years respectively.

#3: Your Height and Weight

Many life insurance companies use something called a build chart to determine the risk of selling life insurance to a prospective policyholder. The build chart shows your Body Mass Index (BMI), which is a measure of whether you are at a healthy weight for your height.

It’s possible to be overweight and healthy, but obesity has been linked to an array of serious health issues, including heart disease, vascular disease and diabetes. Any one of these conditions could cause or contribute to an early death. If you are overweight or obese, you can improve your chances of qualifying for the policy you want by losing weight.

#4: Your Overall Health

Regardless of your age and gender, if you are in excellent health it is likely you will be able to buy life insurance at an affordable price. However, a history of serious illness may mean that you are limited in the types of policies you can buy. You may also pay more for your policy than you would if you were healthy.

Any chronic or pre-existing condition can add to the cost of life insurance. For example, someone who has been diagnosed with cancer or who has a history of heart disease might end up paying premiums that are significantly higher than what they would pay without those issues. We should note here that it is possible to buy life insurance even if you have a serious pre-existing condition, particularly if you have been adhering to your doctor’s recommendations. No medical exam policies are also an option, although they typically have lower death benefits than other policies.

#5: Your Family Medical History

Just as your personal health has an impact on the cost of life insurance, so does your family medical history. While genetics aren’t the only factor that determine whether you will die at a given age, many conditions do have a familial component.

For example, a family history of breast cancer increases the chances that you will be diagnosed with breast cancer in your lifetime. The same is true of things like heart disease and diabetes. Life insurance companies review family histories looking for potential medical issues that might impact their risk.

#6: Your Tobacco Use

If you currently use or have previously used any form of tobacco, including cigarettes, cigars, a pipe or chewing tobacco, you will likely pay a higher premium for life insurance than you would without a history of tobacco use.

The reason is that, according to the CDC, the average life expectancy of a tobacco user is 10 years shorter than for someone who never smoked or chewed tobacco. Even moderate use of tobacco can increase your risk of lung cancer and respiratory diseases such as emphysema and chronic obstructive pulmonary disease (COPD).

#7: Your Occupation

Some jobs are inherently more dangerous than others. Life insurance companies may charge a higher premium for people whose jobs put them at risk of an early death. Some of the jobs that may fall into this category include the following:

  • First responders, including EMTs, paid and volunteer firefighters and police officers
  • Active military members
  • Construction workers
  • Natural resource workers, including those working in the fishing, lumber, marine, mining and the oil and gas industries
  • Aviation workers (pilots and flight attendants)

If you work in a high-risk job, you should expect your premiums to be higher than they would be if you worked in an office.

#8: Your Hobbies

Just as working in a high-risk job can increase your life insurance cost, so can participating in high-risk hobbies and activities. Life insurance companies always want to understand the potential risk of insuring you and your hobbies can make a difference in your life expectancy. Here are some examples of high-risk hobbies:

  • Skydiving
  • Bungee jumping
  • Scuba diving
  • Flying a plane
  • Downhill skiing
  • Racing cars

Engaging in any activity could potentially lead to your accidental death, even something low-risk like gardening. However, the high-risk activities on this list are far more dangerous than more mundane hobbies and therefore add to the insurance company’s risk.

#9: Lifestyle Factors

Outside of regular hobbies and your job, do you do things in your daily life that might increase your risk of dying? If you do, then those things may contribute to you paying more for life insurance than you would without them.

Some of the lifestyle factors that may impact your life insurance cost include the following:

  • Your driving record
  • Your criminal record
  • Your travel history
  • Your financial history and habits

For example, if you have a history of driving over the speed limit or traveling to areas where there’s a lot of violence and political unrest, then you will pay a higher premium for life insurance than if you never had a ticket and stuck to domestic travel.

#10: Policy Type and Death Benefit

The final factor that can impact the cost of life insurance is a big one and can make a significant difference in how much you pay. There are various types of life insurance coverage and a wide array of death benefit limits. These things affect the insurance company’s risk and your premium.

Let’s start with the type of policy you buy. Term life insurance is usually the least expensive option but it requires a medical exam to qualify. A term life insurance policy will pay a death benefit only if you die within the term, although the policy can be converted to a whole life policy at the end of the term.

Whole life insurance, a type of permanent life insurance, covers you for your whole life, as the name suggests. It can be up to 10 times more expensive than term life. There are other options, too, including guaranteed issue life insurance, that are typically chosen by people who cannot qualify for other types of life insurance. These have limited death benefits.

The other factor that will impact the cost of life insurance is your death benefit. You’ll pay less for a policy with a $250,000 death benefit than you will for one with a $1,000,000 death benefit.

Life Insurance Comparison Chart

Tips to Decrease Your Life Insurance Cost

Here are a few quick tips to help you lower your life insurance cost / monthly premium and get a policy you can afford:

  • Buy your policy at a young age
  • Live a healthy, active lifestyle
  • Minimize risky behavior
  • Maintain a healthy weight
  • Quit smoking
  • Shop around (get quotes from at least three insurance companies)
  • Opt out of extras
  • Avoid policies with hidden fees
  • Choose a lower death benefit
  • Opt for term life insurance
  • Ladder term life policies

Laddering term life policies means buying several policies with varying terms. This technique is effective if you have young children and want extra coverage for when they’re young. You might buy three policies with 10, 20 and 30 year terms. Your coverage will decrease as time passes. Paying for three separate term life policies will still be less expensive than paying for a whole life policy.

One of the best ways to minimize the cost of life insurance is to work with either an independent life insurance agent or a broker instead of going directly to a life insurance company. They can help you obtain life insurance quotes from several carriers and evaluate your options to find affordable life insurance.

Shopping for life insurance is easier when you understand the various factors that will impact the cost. You can use your knowledge of the ten factors we’ve listed here to minimize your cost and choose the coverage amount that offers the protection your family needs, including money to pay for long term care or your children’s education.

Do you need assistance with financial planning, including life insurance? Addition Financial is here to help! Click here to read about our MEMBERS Financial Services program now.

The content provided here is not legal, tax, accounting, financial or investment advice. Please consult with legal, tax, accounting, financial or investment professionals based on your specific needs or questions you may have. We do not make any guarantees as to accuracy or completeness of this information, do not support any third-party companies, products, or services described here, and take no liability or legal obligations for your use of this information.