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6 Factors That Can Affect the Cost of Life Insurance

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The average cost of a 20-year term life insurance policy for a forty-year-old is $26 a month. The best term life insurance and permanent life insurance may cost more. Several factors go into setting those prices. The list below should give you a better understanding of how life insurance companies calculate your life insurance costs.

Life insurance policy type

The monthly cost for your policy will largely be determined by the type of life insurance you select. Some policies only provide death benefit protection for your family, while others build cash value monthly as you pay your premiums. Policyholders pay a premium based on the value of the policy and the benefits provided. Here are three examples:  

  • Term life insurance. Term life insurance is a contract for a specific number of years. The policy pays out a death benefit if the policyholder dies during the term. This is one of the simplest types of life insurance, so premium costs are lower.
  • Whole life insurance. Whole life insurance is also known as permanent life insurance because it insures the policyholder and their beneficiaries for life. Whole life is also cash-value life insurance, which builds up a cash value over time as you pay premiums.
  • Universal life insurance. Like whole life insurance, universal life is permanent and builds cash value. The difference is flexibility. Regulating premiums and death benefits with a universal life insurance policy is easier.   

Age of the applicant

Insurance companies assess risk. They view an individual in their twenties or thirties as less risky to insure than someone closer to retirement age. That’s reflected in the cost of the life insurance policy. Applicants will generally be presented with a “rate by age” chart or graph during the signup process. Premiums for older policyholders are usually higher.   

Gender of the policyholder

The life expectancy of women (80.5 years) is over five years longer than the life expectancy of men (75.1 years). That’s based on biology, not gender identity. Insurance companies may ask for additional information from applicants who are transgender or have a transition in progress. Speak with a qualified insurance agent if you have additional questions on this.       

Risk of health problems

People with health conditions like diabetes or obesity may find getting approved for life insurance more challenging. They’ll also pay higher premiums when they do get approved. Insurance companies view people with these conditions as high risk, meaning they might need to pay out benefits sooner than expected. Insurers charge extra for that.  

Family medical history

Certain medical conditions are hereditary and will affect the cost of life insurance. Common examples of this are heart disease, asthma, and diabetes. Certain types of cancer might also “run in the family”, but research is still being done on that. If your family has a history of certain illnesses, your insurance company might charge you a higher life insurance premium.

Occupation and lifestyle

Some occupations are riskier than others. Police officers and firefighters are good examples. A life insurance policy for someone in one of those professions could be expensive. The same rules apply to individuals with high-risk lifestyles, like rock climbers and racecar drivers. Insurance companies assess those risks and charge accordingly.


Simona LeVey did her degree in psychology at Tel Aviv University. She is interested in mental health, wellness, and lifestyle.

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