What is a life insurance premium?
A life insurance premium is simply the payment you make to the insurance company in order to be covered by your policy.
Continuing to pay your life insurance premiums is vital to stay covered. If you can no longer pay your premiums, your beneficiaries will no longer be eligible to receive financial support if you, the policyholder, were to pass away. 😬
How to calculate life insurance premiums
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Life insurance premiums are calculated using statistical analysis and equations. As every insurer might use a slightly different calculation method, it's important for you to shop around as it means premium prices can vary.
There are many different factors that affect the price of your premiums, they include: 👇
The older you are, the more you will generally pay in life insurance premiums. This is simply due to insurers assuming that the older age you arethe more you're at risk of developing a medical condition.
If you have a pre-existing medical condition, your premiums will typically be higher.
If you smoke, it's likely that you will pay more in life insurance premiums due to the health impacts it can entail.
You should always be honest about medical history. Having a poor medical history could put you at risk of a lower life expectancy resulting in you paying more for life insurance.
Family medical history
It's possible for insurance providers to ask about your family's medical history. This may impact the price of your life insurance premiums as you could be at more risk of developing the same conditions as your family.
Having a dangerous job may lead to you paying more for your life insurance policy and could even make it hard to get a policy at all. This is not considered at Bequest though. 😊
How much cover
It's up to you how much cover you need, usually, the more cover you want, the more you'll pay in life insurance premiums.
Type of cover
Different types of life insurance include different prices, so it's best to find the type that suits you and your circumstances the best.
Length of cover
If you decide to take out a longer life insurance policy, it's likely that your premiums will be higher than those that come with a shorter term. However, the earlier you buy, the cheaper it normally is.
Different types of life insurance policies carry different costs
There are many different types of life insurance policies that carry different costs. Here are some examples. ☂️
This can also be called mortgage life insurance as it is typically used to pay off any outstanding mortgage if you pass away before doing so.
We have a decreasing rate of 8% at Bequest.
Level life cover means you simply pay the same amount in life insurance premiums and your cover amount stays the same. If you pass away during your term, your life insurance pay out will be the same as what was agreed at the start of the policy.
Increasing cover is where your premium payments and level of cover increase over time. It mainly helps protect you and your loved ones from the effects of inflation. We don't currently offer this option at Bequest.
Over 50s cover
This type of cover is meant for those who are above the age of 50. With over 50s life insurance however, none of the above matter because you are guaranteed acceptance!
What's the average cost of a life insurance policy?
The average life insurance cost in the UK ranges between £13.24 and £30.40. However, the cost of your life insurance premiums is solely based on your personal circumstances and needs, meaning it can range from person to person.
How can you lower your life insurance costs?
Now that you know the factors that affect the cost of a life insurance policy, you might be wondering if there are any ways to make it cheaper. Here are our tips on keeping your life insurance costs low.
Start your life insurance policy as young as possible
Purchasing a life insurance policy sooner - at a young age rather than later means your policy is likely to be a lot cheaper. Here's how purchasing a life insurance policy earlier could help lower the costs.
If you were to take out a level term life insurance policy for 40 years with a pay out of £500,000 at the age of 30, you could save £27,500 compared to buying that same policy at the age of 40. While it won't always be £27,000 in savings, it is consistently cheaper to purchase earlier. 👏
Term life insurance is usually the cheapest option
Term life insurance policies do tend to be the cheaper option as you only pay your premiums over a specific term. Decreasing cover is usually the cheapest life insurance policy out there as the amount you pay in premiums decreases over your term. However, this does also mean that your life insurance pay out also decreases over your term. 📉
Invest in your health to lower the cost of life insurance cover
It's no secret that living a healthy lifestyle can lower the cost of your life insurance policy. You can do this by introducing healthier habits into your everyday lifestyle such as quitting smoking, cutting down on the amount of alcohol you consume and starting exercising.
Proving a healthier lifestyle means you're less of a risk to life insurance companies and they will be more willing to insure you for a lower price, meaning you'll pay less in life insurance premiums. 🙌
How much cover will you need?
Working how much life insurance cover you need is dependent on your needs. If you're looking to provide financial support for your loved ones after you pass away, level term life insurance is the perfect policy to do so. If you're looking to cover your mortgage if you were to pass away before paying it off, decreasing term life insurance can be a great way to just cover your mortgage. ☂️
It's worth sitting down and thinking about your reasons to get life insurance as this will help you work out how much cover you need. Life insurance could cover:
- financial support for loved ones
- childcare costs
- education costs for children
- funeral costs
Whilst you may want to ensure your loved ones are financially supported when you are no longer here, it's important that you don't end up with premiums that you can't afford.
This could end in you not being able to afford your life insurance premiums and you and your loved ones will no longer be protected.
You should never lie for lower premiums
As there are many different affecting factors on the price of your life insurance premiums, you should always be honest when filling out your application.
If you falsify or withhold information on your application, this is known as non-disclosure and can result in your beneficiaries being denied a claim.
Contact us today for life insurance quotes
We currently offer level term and decreasing term life insurance to ensure peace of mind for you and your loved ones. 💛
How long do you have to pay premiums on life insurance?
The length of time you pay life insurance premiums is dependent of the length you choose. If you choose a term life insurance policy, you will pay your premiums until you pass away or until the end of your term if you outlive it. A whole of life insurance policy will mean you continue to pay premiums until you pass away.
How are life insurance premiums calculated?
The amount of risk you are to a life insurance company helps them determine how much your premiums are. After asking multiple questions, the riskier you are (solely based on the insurers opinion), the higher your premiums.
What is single premium in life insurance?
Single premium is a type of life insurance in which the policyholder pays a lump sum upfront in exchange for a guaranteed life insurance pay out. Meaning your beneficiaries are guaranteed a pay out when you pass away.
Is life insurance premium paid monthly?
Life insurance premiums can be paid monthly, quarterly or annually. At Bequest, our life insurance policies are paid for in monthly premiums.
What is the formula for insurance premiums?
Each life insurance provider uses a slightly different methodology to calculate life insurance premiums. The price is dependent on the affecting factors such as age, health, smoker status and length, type and amount of cover.