What Is a Life Insurance Premium?

A life insurance premium is the amount you regularly pay to your insurance company to maintain your coverage.
Robin Hartill, CFP®
By Robin Hartill, CFP® 
Edited by Lisa Green Reviewed by Tony Steuer

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A life insurance premium is the amount of money you pay to your insurer for your life insurance coverage. Depending on your policy, you may pay your life insurance premiums monthly, quarterly or annually. If you don’t pay your premiums, your policy can lapse and your survivors won’t receive a death benefit.

Your premiums are determined during the life insurance underwriting process and depend on a number of different factors, including:

  • Your age.

  • Health history.

  • Tobacco use.

  • Lifestyle factors, like your driving history and whether you have risky hobbies.

  • Coverage amount.

Essentially, your insurer considers how risky you are when setting your premium. Someone who’s older with a history of health problems typically will pay more than a younger applicant with no medical issues because the insurer believes there's a greater chance they’ll die while the policy is in force. That means it’s more likely the insurance company will have to pay a death benefit.

Life insurance premiums also vary widely by the type of life insurance policy you choose. For example, premiums on permanent life insurance, such as a whole life policy, are often more than 10 times more expensive than a 20- or 30-year term policy with the same death benefits, according to NerdWallet's analysis of average life insurance rates. The reason for this is that permanent policies can provide coverage for the rest of your life, while term life insurance is temporary. Permanent life insurance also has a built-in savings component called cash value. If you purchase add-on features, called life insurance riders, which allow you to customize your policy, your premiums will also be higher.

It’s always a good idea to compare quotes with multiple life insurance companies because their prices will vary. You could also benefit from working with a life insurance broker or an independent insurance agent, particularly if you have a health condition that makes it difficult to qualify for affordable coverage.

Learn more about life insurance premiums

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