Calculating Life Insurance Premiums

Calculating Life Insurance Premiums

Find out how life insurance companies use risk factors such as your age, health, occupation, and pastimes in calculating life insurance premiums.

Calculating life insurance premiums

Before accepting your application, life insurance companies will ask a number of questions to identify how much of a risk you pose – that is, how likely it is that they will have to pay-out on a claim.

Each insurer has its own set of underwriting criteria to determine on what basis to issue a life policy and, if so, at what price.

When you initially receive a quote, it always assumes good health and that you don’t work in a dangerous occupation, or regularly visit dangerous locations. It also assumes that you don’t engage in very dangerous pursuits.

So any initial quote you get assumes “standard rates” and as so is based on your age, your smoker status, the cover amount, and the period of cover.

It’s only when you make an application that you provide additional information on the application form that may have an effect on the standard rate quoted premium.

How different factors affect life insurance premiums

Your Age:

The older you are when you take out life insurance, the higher your premium is likely to be, as you’ll be seen as a higher risk to insurers. As the cost of premiums tends to increase with age, getting life insurance as soon as possible could be worth considering, especially if you have a young family or dependants. There are, however, a variety of options available for getting life insurance in later life.

Height and weight

Insurers take height and weight into consideration as an indicator of whether you have a healthy body mass index. If you’re obese you’re more likely to suffer from weight-related medical conditions, such as diabetes, heart disease and breathing problems and you are also more likely to get cancer.

Guaranteed payouts

Whole of life insurance will pay out whenever the policyholder dies, whereas the more common term insurance only pays out if the policyholder dies in the term of the policy; this means that whole of life policies are more expensive. It is alos worth noting that in Ireland you can get term insurance cover to your 90th birthday.

Medical history

Whether your medical history has an effect on your premium or not, will depend on the severity of any previous illnesses that you’ve had, or any that you’re currently suffering with.

Life-threatening conditions like type one diabetes could increase the price of your cover dramatically, and if you have previously suffered from cancer most insurers won’t offer you protection until you’ve been in remission for at least five years.

Read more about life insurance if you have pre-existing medical conditions.

Pastimes & Hobbies

If you partake in a high-risk hobby – for example rock climbing, sky diving, motorsports, skiing, or horse riding – it can affect your premium negatively, depending on the life insurance company chosen.

Family medical history

Whether or not your family’s medical history is taken into account will depend on the severity of any condition, how many close family members were affected and their age when they became ill, or died. If there’s a history of severe illness in your family, such as cancer, it could affect your premium.


Certain occupations will be deemed a higher risk than others. For example, soldiers, pilots, fishermen and off-shore oil, or gas industry workers can expect to pay more than those who work in what is deemed a safer environment.

Smoking or tobacco use

Due to the proven link between smoking and life-threatening diseases such as lung and throat cancer, smokers statistically lead shorter lives and therefore face higher life insurance premiums

Generally, if you’ve used tobacco in the last 12 months you’ll be considered a smoker. This includes any tobacco-based product including cigarettes, cigars and pipes. If however you are on e-cigarettes only for 12 months or more, you may be able to get non-smoker rates.

Insurers don’t usually distinguish between how many cigarettes you smoke – whether you have a 20-a-day habit, or just smoke the occasional one, you’ll still be classed as a smoker and as a result pay much more than a non-smoker.

Alcohol consumption

Excessive drinking – that is, drinking more than the recommended guidelines for alcohol consumption regularly – could see your insurance premium rise as you’re more likely to suffer alcohol-related health problems, such as liver disease.

Foreign travel

The insurer isn’t interested in your last family holiday to France, but in whether you’ve been anywhere that would pose a potential health risk – for example, if you’ve travelled to a country with a high level of HIV, or tropical diseases or a place undergoing war, or upheaval.

Your gender

Prior to the introduction of the European Court of Justice gender directive, your sex would be a major factor in calculating insurance premiums.

Statistically women live longer so they used to enjoy lower premiums, but the introduction of the legislation in 2012 meant that gender could no longer be taken into account when calculating life insurance.

For more information

Should you like for information and would like to arrange a call from an adviser please complete an enquiry form.

Ken O’Gorman – QFA – Smart Financial Protection