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Life insurance premium

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Your life insurance premium dictates what you’ll pay to maintain life insurance coverage, so it’s important to understand how premiums work. In order for your family to benefit from your life insurance policy, you’ll need to pay your premiums to keep the policy active. It’s critical to find a policy that meets your needs and fits your budget. This article explores everything you need to know about life insurance premiums, how they’re determined and how you may be able to get a lower rate. 

What is a life insurance premium?

A life insurance premium is the amount you pay your life insurance provider towards the cost of life insurance coverage. Depending on the provider, you may make payments monthly, quarterly or annually. If you pass away unexpectedly without a lapse in paid premiums, your named beneficiaries will be guaranteed a death benefit, or a sum of money equal to the value of your policy. 

This death benefit can help your family replace lost income, pay off the mortgage on your home, cover immediate outstanding debts or pay for funeral expenses. Without life insurance, your family might face financial hardship if you were to die. Premiums ensure your policy will pay out when the time comes and they need it most.

How are life insurance premiums determined?

Your life insurance provider will assess many different factors when determining the risk to insure you, and therefore how much your policy will cost. If your age and health make it more likely that the provider will need to pay the death benefit, they’ll charge you a higher premium. But you can also control the amount you’ll pay by choosing a lower coverage amount and comparing premiums across insurers. Based on your policy length and type, premiums will also be affected. Here are some other factors that will influence your premium. 


Life insurance policies get much more expensive for older applicants as age causes a general decline in health and life expectancy. Waiting twenty years to purchase life insurance could potentially double your premium. It’s often most affordable to purchase life insurance as soon as you need it — and the earlier in life, the better. 

Health and medical history

Some life insurance companies require a physical exam and check health factors like your blood pressure and cholesterol levels, and all life insurance providers will review your medical history. Providers look for hereditary diseases in your family history, along with diagnoses like heart disease and diabetes. If your medical history reveals serious issues, it’ll typically drive up the cost of your premium because it represents a greater likelihood the provider will have to pay a death benefit sooner. 


Life insurance providers typically charge smokers a higher premium than non-smokers, as smoking increases your risk of all kinds of health problems. If you quit smoking before purchasing a life insurance policy, you may be able to get a lower rate than a current smoker. 


Certain occupations and hobbies can be seen as high-risk in the eyes of your life insurance provider. If you’re an avid rock climber, or work as a police officer or construction worker, your risk of early death will be higher, which means your insurance company will charge you a higher premium. 

Type and amount of coverage

There are several different types of life insurance coverage, and some are more costly than others. For example, a whole life insurance policy provides coverage for your entire life, and premiums for this type of coverage can cost significantly more than term life insurance, which is only designed to last for a specific period of time. 

If you choose term life insurance, the length of the term will impact your premium. If your mortgage will be paid off and your children will be grown in 20 years, you likely won’t need to purchase a 30-year term policy. In addition, you can control the amount of the death benefit to suit your needs. The lower the death benefit, the lower your premium will be. It’s recommended to only buy as much coverage as you need

Are life insurance premiums tax deductible?

Since life insurance is a personal and voluntary expense, life insurance premiums are not tax deductible. One exception is when you are paying someone else’s premiums, such as when you are providing life insurance to an employee or to an ex-spouse as alimony. In these situations, life insurance premiums may be tax deductible. 

The good news is, a life insurance death benefit is not considered income. So if you die unexpectedly, your beneficiaries will not have to pay taxes on the payout. The only exception is if you have a whole life insurance policy with a cash value that accrues interest. In this case, your beneficiaries would have to pay taxes on the interest earned. 

Are life insurance premiums negotiable?

While it’s not possible to negotiate a lower rate with a life insurance provider, you can adjust your payout amount and term length to get a lower premium. Changes to your lifestyle to improve health can also have an impact on your rates. And since every life insurance provider determines premium amounts differently, shopping around can give you valuable insight into the best coverage at the most competitive rates. Compare life insurance quotes from different insurance companies to make sure you’re getting the best deal. 

The takeaway

  • A life insurance premium is the amount you pay to maintain a life insurance policy and ensure the death benefit is given to your beneficiaries at the time of your death.
  • Your premium is determined by factors such as your health, age, lifestyle and policy type and length.
  • You can get a lower premium by only purchasing as much coverage as you need and choosing term life insurance.

Since you need to keep up with your life insurance premium payments in order to maintain coverage, it’s important to get a policy with an affordable premium that fits into your budget so you don’t default on payments. While you can’t control certain factors such as your medical history, you can purchase life insurance as soon as you need it, and only buy as much coverage as you need. This will help keep your premium affordable. It’s also a good idea to compare quotes from different life insurance providers, since every insurance company weighs your information differently.

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