Life Insurance Rates

When shopping for a life insurance policy, the amount of coverage to be obtained is a pertinent factor. This coverage protection, however, will require a certain amount of premium rate to be charged.

How Life Insurance Rates are Determined

There are a number of different factors that go into determining the rate that a policy holder will pay for his or her life insurance policy. These typically will include:

  • Age – The age of an applicant will carry a great deal of weight in determining a life insurance premium. This is because a person’s life expectancy plays a very large part in how long they are likely to be paying premiums into the policy as versus when it is likely that the insurer will be required to pay out the death benefit claim.
  • Health – An applicant’s health will also factor into what premium rate will be charged. This is because those who possess adverse health conditions – and especially those conditions that could potentially be fatal such as heart disease – are more likely to submit a claim. Therefore, this possibility is also factored into the premium amount that is charged. If the applicant needs to choose a no medical exam life insurance policy, this will also increase the premium.
  • Occupation – While it may seem strange to include one’s occupation into a life insurance rates calculation, this is actually a very important criteria. This is because there are some individuals who work in more dangerous occupations than others – and such jobs could make a potential death claim more likely. For example, a construction worker who regularly uses heavy equipment will typically be charged a higher rate for life insurance than someone who works in an office.
  • Activities – Participating in dangerous activities such as skydiving and bungee jumping can also force a higher rate to be charged over an applicant who spends time reading or writing as a hobby.
  • Tobacco or Nicotine Usage – If an applicant for life insurance coverage smokes – or even uses tobacco or nicotine in other forms – the premium rate that is charged will likely be higher than for an applicant who does not.
  • Amount of Coverage – Certainly, the amount of coverage that is being applied for will also be a determinant in the premium that will be charged. In this instance, a higher amount of coverage will generally require a higher amount of premium.
  • Length of Coverage – While permanent life insurance policies are typically purchased for one’s entire life – with premiums charged accordingly – term life insurance plans can have differing time frames, or “terms.” The length of these terms will also be a factor in the policy premium calculation.
  • Type of Policy – The type of policy being applied for will also factor into calculating the premium that is charged. This is because the policy may offer features other than just a death benefit. For example, because a portion of the premium on a whole life insurance policy goes towards funding the death benefit, while another portion goes into the policy’s cash value, these plans typically have a higher premium than a basic term life plan that provides only death benefit coverage.

Life Insurance Rate Classifications

When quoting the premium for a life insurance policy, an applicant will be placed into what is referred to as a “risk classification.” This means that, while the person was approved to obtain coverage, he or she may be considered more of a risk due to certain health conditions or other factors. Likewise, should a person be in extremely good health, they may be considered as “preferred” and will therefore be charged a lower rate than others who are more of a “standard” risk.

Typically, life insurance risk classifications may include:

  • Preferred – No Nicotine
  • Preferred – Nicotine
  • Standard – No Nicotine
  • Standard – Nicotine
  • Substandard

How Life Insurance Rates May Be Lowered

Even if a policy holder is initially charged a higher premium rate or placed into a substandard classification, there may be ways to lower future premiums. For example, if a person stops smoking or using nicotine for a certain length of time, he or she may be able to have their premium reassessed and ultimately lowered once they are considered a non-smoker.

Likewise, if a person was initially working in a more dangerous occupation when they applied for coverage but is now working in a safer environment, it is possible that the policy premium may also be lowered at a future date.

Obtaining Life Insurance Quotes

One can receive life insurance quotes in a number of different ways. For many years, in-person meetings with a licensed agent provided the best – and only – way to do so. Today, however, with the popularity of the Internet, there are numerous online quote engines that can offer the amount of premium to an individual once certain information such as state or zip code has been submitted.

Obtaining online life insurance quotes can save a great deal of time, and can also allow for an individual to quickly and easily compare quotes on differing policy types, as well as from several different life insurance carriers.


Susan Wright holds a BA from Michigan State University and an MBA from St. Louis University. Having over 20 years of working experience in the insurance and financial services industry, she has trained more than 10,000 financial services representatives. Susan has had licenses in real estate, insurance, and NASD Securities, and she has earned nine industry professional designations, including CLU, ChFC, RHU, REBC, CSA, CLTC, CCFC, CSS, and ADPA. Read more about her on Google+