What affects life insurance premiums?

The cost of life insurance is often one of the first things you notice.

At the same time, it is not always immediately clear what sits behind that number, or why one policy may cost more than another.

Understanding what influences your premium can help you choose life insurance products that feel right for your situation, without adding unnecessary pressure to your monthly budget. 

When you take out a policy, your insurer assesses how likely it is that you will need to claim, and how large that claim would be. Several factors affect your premium (some of which are outlined below).

The life insurance policy you choose

The life insurance product, and the amount of cover you choose has a big impact on what you’ll pay each month. In simple terms, the more cover you take out, the higher your premium is likely to be, because the payout is larger when it’s needed.

For some people, a smaller amount feels sufficient to cover the basics. For others, it may feel more reassuring to have a higher level of cover in place, depending on the kind of support they would want their family to have. Some insurers allow you to choose different cover amounts for each person insured, which makes it easier to shape the policy around your needs while keeping the overall cost in line with what you’re comfortable paying. 

The number of people your policy covers

If you’re covering more than just yourself, the cost will usually increase. That’s simply because the policy is supporting more than one person.

You might choose to include a partner, your children, or even extended family, depending on what feels right for you. Some policies allow you to cover several people under a single plan, which can make things easier to manage in one place, but will naturally affect the overall premium.

Age

Age is another factor that naturally affects the cost of your life insurance. In most cases, the older the person being covered, the higher the premium will be.

That’s based on how risk changes over time, and how the likelihood of a claim is factored into the cost of your policy. The older you are, the higher the probability of illness, disability or death. 

Health and medical history

Pre-existing conditions and family medical history determine your risk profile. With Investec Life, most clients can apply quickly and digitally without medical testing. Investec Life underwrites your policy upfront, so changes to your health in the future will not negatively impact your existing cover and premiums.

Lifestyle and occupation

Smokers generally pay a higher premium than non-smokers. Higher-risk occupations or hobbies (such as private flying or motorsport) will also affect your premium. It is important to review these factors on a yearly basis and inform us of any changes.

How the life insurance policy is structured

Not all life insurance products work in exactly the same way. Small details in how a policy is set up can make a difference to what you pay.

Things like waiting periods, level or age rated premium patterns, how cover is split between different people, what the cover will payout for, and any additional features included in the policy all play a role, even if these details aren’t always obvious.