Calculation of a Life Insurance Premium

The calculation of a life insurance premium is a matter of science and math. The amount you pay depends on statistically how soon you are likely to die, based on a number of risk factors. If you are more likely to die relatively young, you will pay a higher premium. What you pay for life insurance is not totally out of your control: Lifestyle changes can alter a number of risk factors, and you can choose a different type of life insurance policy.

Type of Policy

Life insurance comes in two basic types, term or whole life. A term policy is limited by a specific time period, often 10, 15 or 20 years. Coverage ends at the end of the policy period, although some policies offer the option of conversion to permanent insurance at the end of the term. Permanent policies stay in effect for the life of the insured. Term policies are much less expensive than permanent policies.


Your age when you purchase a policy is a major factor in determining the premium. The older you are, the higher the premium you will pay, because your risk of death increases as you age. This means that the life insurance company is more likely to pay a death claim with a term policy, or that the company will collect less premium money before your death with a permanent policy. The insurance company compensates for either factor by collecting a higher premium.

Tobacco Use

If you use tobacco of any type, your life insurance premiums will increase because of reduced life expectancy. If you quit smoking, you might be able to eventually save on your life insurance premiums. The insurer will usually require you to be tobacco-free for at least a year. The insurance company might also want you to submit to a physical exam, and it could use blood tests to determine that you are no longer using tobacco. In some cases the insurance company might issue a new policy rather than modify your premium.

Other Factors

A family history of heart disease, cancer or other hereditary health risks might increase your life insurance premiums, particularly if a close relative died young from one of those conditions. Obesity also increases insurance premiums. Certain careers, especially those involving dangerous jobs, can cause life insurance underwriters to raise your rates. Perilous hobbies such as scuba diving, skydiving or flying recreational aircraft might mean higher premiums. Some insurers might not issue a policy when these risk factors are involved.