Life Insurance Premiums
As a responsible mortgage brokerage, we want our clients to be as well-informed as possible. That is why we have guides on all the products we have on offer. Case in point, we previously brought you articles on, Exclusive Life Cover and Mortgage Protection, Inspiring Grip to Term Life Insurance, and Critical Life Insurance At Time When You Least Expect. We felt it was important for clients to know how life insurance premiums are calculated hence today’s article. 
As you delve into the world of life insurance, you may come across the term ‘premiums’ and wonder about its significance. Let’s demystify life insurance premiums and explore how they are calculated to help you make informed decisions about your protection.
What is a Life Insurance Premium?
Simply put, a life insurance premium refers to the monetary payment made to your life insurance provider, ensuring your coverage remains active throughout the policy term or until your demise, as long as you pay the premiums on time.
How Do Life Insurance Premiums Work?
With a term life insurance policy, you can determine the coverage duration, aligning it with your mortgage term or until your children reach a specific age. You will pay your premiums regularly and monthly during the chosen policy term.
- Crucial Tip: For your life cover to remain valid and ensure a successful claim in the future, it is imperative to keep your premiums up to date.
- Factors Influencing Life Insurance Premiums: The calculation of life insurance premiums involves several considerations. Let’s explore ten personal factors that can impact the costs, followed by five policy-related aspects.
Personal Factors Affecting Premiums
- Age: The timing of taking out life insurance plays a role in premium calculation. Generally, the later you obtain life insurance, the higher the likelihood of a claim, resulting in higher premiums. Conversely, your life insurance premiums will likely be more affordable if you’re in good health and younger.
- Health Status: Life insurance premiums are calculated based on the medical information you provide during the application process. Any health condition that increases the likelihood of a claim may lead to higher premiums.
- Family Medical History: Your family’s medical history also affects premium calculations. A history of serious medical conditions in close relatives, such as diabetes, cancer, stroke, dementia, or heart disease, may result in higher premiums.
- Weight: Insurers, consider your body mass index (BMI) when calculating life insurance costs. According to the NHS, a healthy BMI (between 18.5 and 24.9) is preferable, as higher BMI levels may indicate a higher risk of health problems, leading to increased premiums.
- Smoker Status: Smokers statistically face a greater risk of health issues like stroke, cancer, and heart disease, leading to higher premiums. Vaping is treated similarly to smoking for insurance purposes.
- Alcohol Consumption: Excessive alcohol consumption is linked to increased health risks, including serious diseases and a higher risk of accidents and injuries, as reported by the NHS. This may result in higher life insurance premiums.
- Occupation: Certain occupations carry higher risks to life, such as police or armed forces roles or jobs involving working at heights. If an insurer deems your occupation’ high risk, you may face higher life insurance premiums.
- Hobbies: Engaging in hazardous hobbies or extreme sports may also impact life insurance premiums. Insurers may take this into account when calculating your premiums.
These factors collectively influence the cost of life insurance premiums, and it’s essential to be aware of their implications when selecting a policy. Understanding these elements will empower you to make well-informed decisions about your life insurance coverage.
Factors Affecting Life Insurance Premiums: Activities, Policies, and More
When considering life insurance, it’s essential to understand the various factors that influence your premiums. Let’s explore these elements, ranging from adventurous activities to policy specifics, to help you make informed decisions about your life insurance coverage.
Activities That Impact Premium
Insurers may consider certain adventurous activities as potential risks for life insurance. Here are some examples of such activities:
- Paragliding
- Climbing
- Skydiving
- Mountaineering
- Trekking
- Caving and potholing
- Canyoning
- White water rafting
- Motor car sports
- Private or club flying
However, these activities don’t automatically prevent you from obtaining life insurance. The exact cost of your premiums will depend on several factors, such as the frequency of participation, your age, experience level, the location of the activity, and whether you’re a member of a professional body associated with the activity.
Other Personal Factors That May Affect Premiums
- Mental Health: A history of mental illness or conditions like depression or anxiety may impact your life insurance premiums. Nonetheless, you can still obtain coverage, with the decision based on your recent medical history and the nature of your condition.
- Location: If you intend to reside overseas for a period, factors like healthcare accessibility, armed conflict, or the prevalence of certain diseases may influence your life insurance premiums. You must be a UK resident to qualify for life insurance, meaning you have spent at least 183 days in the country over the last tax year.
Policy Factors That Affect Premiums
Now, let’s explore key policy-specific factors that play a role in determining your life insurance premiums:
- Size of Payout: As a general rule, the higher the life insurance payout, the higher your premiums will be. Use a life insurance calculator to estimate the coverage amount you need.
- Length of Cover: The duration of your life insurance policy can also impact premiums. Longer coverage periods increase the likelihood of a claim, resulting in potentially higher premiums.
- Type of Life Cover: The type of life insurance you choose affects premium calculations and the level of protection you receive.
Some options include:
- Level-term life insurance (higher premiums): Consistent coverage throughout the policy term.
- Decreasing life insurance (lower premiums): Suitable for repayment of mortgages as coverage and the mortgage balance decrease.
- Type of Premiums: Some insurers offer fixed premiums, guaranteeing fixed rates for the policy duration. Others may provide ‘reviewable’ premiums, subject to potential increases in the future.
- Choice of Insurer: The cost of life insurance premiums may vary depending on the insurer. Consider factors beyond cost, such as exemptions for certain illnesses, additional benefits like Terminal Illness Cover, and the insurer’s reputation and ratings.
Life Insurance Extension Costs
Renewing your life insurance upon policy expiration may lead to higher premiums. As your health status may change with age, obtaining a new policy may increase costs compared to your initial coverage.
You can request changes to your existing policy or increase coverage without additional medical questions following significant life events like marriage, childbirth, or civil partnerships. Keep in mind that such changes will impact your premiums.
Understanding these factors will help you navigate the complexities of life insurance and choose a policy that best suits your needs and offers reliable protection for you and your loved ones.
Here at Connect Mortgages, we provide a complete service to help you make informed decisions about your life insurance. Our advisers can answer any questions and provide expert advice in selecting the right cover for you. Get in touch today, and let us help you secure peace of mind.
