1. Home
  2. Insurance Hub
  3. Life Insurance
  4. What Are Life Insurance Premiums?
Published 02 August 2022

What Are Life Insurance Premiums?

A life insurance premium is the sum of money you’ll need to pay an insurer in return for providing you with life cover. The life insurance premium you’re asked to pay will depend on many factors relating to you and the policy you choose.

Keeping up to date with your life insurance premiums is essential if you want your life cover to remain in place and pay out when it should. Read on to find out more about life insurance premiums, including the different types of premium available and how life insurance premiums are calculated.

What is a life insurance premium?

A life insurance premium is the amount you must pay an insurer for a life insurance policy. In return for paying life insurance premiums, a policy is designed to pay out a lump sum to your beneficiaries or estate if you were to die during the policy term.

Paying life insurance premiums can provide peace of mind that your loved ones will have a certain level of financial support to rely on if you die while the cover is in place.

» MORE: Do I need life insurance?

How do life insurance premiums work?

Typically, life insurance premiums are paid either annually, quarterly, or monthly. Your cover will only usually remain in place by keeping up to date with the life insurance premiums that you’re required to pay.

If you fail to pay life insurance premiums when you should, it might invalidate your policy, meaning it won’t pay out even if you die within the policy term. One exception might be if you have waiver of premium benefit on your policy and you’re unable to pay your premiums because ill health or injury prevents you from working.

Are there different types of life insurance premium?

Life insurance premiums are either guaranteed or reviewable.

With guaranteed premium life insurance your premiums are fixed and will remain the same throughout the policy term. This gives you certainty over what you’re expected to pay.

With reviewable premiums, how much you pay is reviewed at certain points during the policy term. This means they are likely to rise, although reviewable premiums tend to be less expensive than guaranteed premiums at the start of the policy.

When you apply online using our comparison tool, our partner LifeSearch only offers guaranteed premiums, which won’t change for the duration of your policy. Reviewable premiums might be available but you will need to talk to a LifeSearch adviser.

How are life insurance premiums calculated?

Insurers calculate life insurance premiums by looking at a number of factors. Some relate to you on a personal level, and in particular how risky an insurer thinks it is that you could die during the policy term that you want. Others relate to the policy itself, including the type of cover you would like and how much.

Things about you that affect premiums

When applying for life insurance, be prepared to share the following personal information:

Things about your policy that affect premiums

The make-up of your policy and the cover you want will influence your life insurance premiums as well, including:

Each insurer has its own method of calculating life insurance premium, which is why comparing providers can make sense. Crucially, answer any questions an insurer asks you honestly, as your policy could be made invalid, and not pay out, if you don’t tell the truth.

How long do you pay life insurance premiums?

With term life insurance, premiums are payable for the entire duration of the policy term. If you fail to pay your premiums when you should, your policy could lapse, and there may be no payout if you die. The exception might be if your policy includes waiver of premium benefit and it’s been activated, because you’re off work due to illness or injury and can’t afford to pay.

The same generally applies to whole of life policies, where you’ll need to be prepared to pay premiums for the rest of your life, because that’s how long your cover lasts. That said, some whole of life policies have a maximum age beyond which you stop paying premiums, but your cover remains in place. This might be somewhere between 80 or 90 years old, depending on the insurer, but you’ll need to check the policy terms and conditions to see if it’s included and when it might begin.

Are life insurance premiums paid monthly?

Life insurance premiums are most often paid monthly, although you may find some insurers that offer the option to pay quarterly or annually.

What happens if I can’t pay my life insurance premium?

Generally, a life insurance policy becomes invalid and won’t pay out if you miss any of your premiums. This might not always be the case if your policy includes waiver of premium benefit and you can’t pay because you’re unable to work for medical reasons. You’ll need to contact your insurer to see if you’re eligible for waiver of premium to be activated.

Talking to your insurer is also a good idea if you don’t have waiver of premium benefit, as some might allow you extra time to pay before a policy is cancelled.

Image source: Getty images

About the Author

Tim Leonard

Tim is a writer and spokesperson at NerdWallet who has over 20 years’ experience writing about almost all aspects of personal finance. During his career at Moneyfacts, Virgin Money and…

Read More
Dive even deeper
Feel the Fear and Consider Life Insurance Anyway?

Feel the Fear and Consider Life Insurance Anyway?

Life insurance can stir up difficult feelings that may even be a barrier to getting cover. Understanding why this decision can be emotionally charged might help you to approach it differently.

Life Assurance vs Life Insurance: What’s the Difference?

Life Assurance vs Life Insurance: What’s the Difference?

Life assurance is cover that lasts your whole lifetime, while life insurance usually lasts for a specific period of time. Here’s why that difference matters if you’re thinking of putting that protection in place.

Can You Get Life Insurance with No Medical?

Can You Get Life Insurance with No Medical?

Most people don’t need to have a medical exam to get life insurance. But if the insurer does ask you to have one, it doesn’t necessarily mean you won’t be offered cover.

Back To Top