10 Factors That Impact Life Insurance Costs

Guest Blog Post by Corey Purkat

Life insurance costs vary for myriad reasons. First, all insurance companies use an analysis of mortality statistics to determine the level of risk they will incur when insuring customers.  Beyond that, there are numerous factors pertaining to us as individuals that act as the variables in the formula to set our premiums. 

Let’s break it down and examine how premiums are determined for the two main types of insurance, term and whole life.

1.    Length of Term

The length of the term you choose for a term policy will impact the cost of the insurance.  The longer the term, the more expensive the premium.  The insurance company may be more likely to pay a death benefit if you chooses a term that will last until you are older.  Thus, they charge more to cover costs.

2.   Age

Your age at the start of any policy helps determine premium cost.  The younger you are, the cheaper the premium.

3.   Smoker vs. Non-Smoker

Smoker vs. non-smoker is a huge factor when insurance companies set their prices.  For obvious reasons, a smoker will always pay a higher premium.

4.   Medical Exam

Whether or not you opt to have a medical exam effects policy costs.  If you allow the insurance company to review the findings of a medical exam and you are healthy, congratulations!  Your premiums will be lower.  Unfortunately, the opposite is true if you are not as healthy.  Negative findings equal higher costs.

5.   Gender

Gender plays a role in the formula.  Female rates are always lower the male rates.

6.   Current Health

The state of your health makes a difference when determining costs.  If you are currently battling cancer, an insurance company will charge you much more.  Maybe you battle chronic pain due to disc issues in your spine.  You may be charged more as well.  It doesn’t always have to be a debilitating disease that ups your premiums.

7.   Medical History

Your medical history is also a contributing factor.  If high blood pressure runs in your family, and three people in your genetic line have suffered strokes, you are more likely to have increased premiums.

8.   Job

Your job or career can have a direct impact too.  If you are a pilot or a roofer an insurance company may see you as a greater risk.

9.   Lifestyle

Lifestyle and recreation play a part as well.  Someone who races motorcycles every weekend is a greater risk than someone who spends their free time working in a backyard vegetable garden.

10.  Death Benefit

The size of the death benefit you choose directly effects the cost of your premiums as well.


Now you know how an insurance company is analyzing you to determine premium costs.  Take some time to be introspective.  You can begin to decide how to ensure that the life insurance you choose will meet your financial goals and your family’s needs. And if you ever have any questions, know that a financial advisor can help you think through and consider your life insurance options.



Corey Purkat, CFP®, AIF® is the Founder & CEO of Northwoods Fiduciary Advisors, a ee-only RIA hat specializes in working with small business 401(k) plans and is located in St. Paul, Minnesota. 

Corey and I became friends after connecting through the XY Planning Network, and I asked him to write some thoughts as a guest topic for this site.