Updated July 9, 2021|4 min read
Policygenius content follows strict guidelines for editorial accuracy and integrity. Learn about oureditorial standards
and how we make money.
Buying life insurance means buying coverage and protection for your family. You make payments, called premiums, to ensure your policy is active and would pay out a death benefit to your loved ones when you die.
Premiums are set by your insurance company and are based on a number of factors, including your age and health, the type of policy, the coverage amount, and whether you add on any riders. Except in rare cases, your rates are set for the life of your policy.
Six main factors determine your life insurance premiums: type of policy, term length, coverage amount, your age, your health, and policy add-ons
Premiums are paid monthly, quarterly, semi-annually, or annually
Traditional life insurance policy premiums stay the same for the duration of the policy
Life insurance premiums are not tax-deductible
Your premiums are the payments you make to keep your life insurance policy in force. As long as you pay your premiums, your life policy remains active for the policy’s duration.
If you buy a permanent life insurance policy like whole life insurance, your policy premiums keep your coverage in force for life and pay for extra features like a cash value you can access while you're alive. Term life insurance stays in force for a set period (the term), usually 10-30 years, then expires.
Most people pay their premiums monthly, but you can save money by paying annually. Some life insurers offer discounts of 2-5% if you pay up front each year. Those savings can add up, but monthly payments are easier for most people to budget for.
The most commonly accepted forms of payment are electronic funds transfer (EFT) and check, though other forms may be available from your insurance company. Most life insurance companies do not accept credit card payments beyond the initial payment, and none accept cash.
Six main factors determine your life insurance premiums:
Whole life insurance policies don’t expire and have a cash value component, which can gain or lose value over time and can be used while you’re alive.
The higher your coverage amount, the higher your premiums. For example, a 35-year-old female without serious health concerns can pay about $24 per month for a 20-year, $500,000 term policy, but about $42 per month for a 20-year, $1,000,000 policy.
Coverage that lasts for longer costs more money. A 20-year, $500,000 policy for a 35-year-old male costs about $29 per month, compared to around $45 per month for a 30-year, $500,000 policy.
Life insurance rates are higher for older applicants. Premiums increase an average of 4.5-9% for each year you age.
Insurers use these findings to assign you a health rating that significantly impacts your premiums.
It’s possible to add riders to your policy to customize your coverage. While some riders are free or included with your policy, others require an additional premium.
Riders that typically cost extra include:
Long-term care: Uses the death benefit to pay for assisted care if you can no longer care for yourself independently.
Return of premium: Refunds the premiums you paid into the policy after it expires.
Waiver of premium: Waives premium payments if you become disabled and are unable to work.
Life insurance quotes are estimates that your insurance broker or company give you before and during the application process. Your initial quotes are usually close to your final premiums, but can change based on information your insurer discovers during underwriting.
When you apply for life insurance, the first quotes you get are based on an initial series of questions about your health, family history, and driving record. Next, you’ll talk to a life insurance agent on the phone (life insurance is highly regulated, and this is a must). The agent will get a fuller picture of your health, and this additional information may change your quotes.
After your call, you’ll set up a free medical exam or the insurer will request previous medical records from your doctors. If more potential insurance risks are discovered, your rates will change again.
Ready to shop for life insurance?
Your life insurance premiums are not tax-deductible. But in most cases, the death benefit is paid out tax-free to your beneficiaries.
There are exceptions: if the death benefit is paid to your estate, the estate could be subject to taxes. And if your beneficiaries receive the death benefit in installments, any interest earned on the unpaid portion is taxed as income.
If you have a life insurance policy in place and can’t pay your premiums on the billing date, you have a 30-day grace period to make a payment before they cancel your policy. Under special circumstances, they might extend this period.
During the COVID-19 pandemic, many life insurance companies are extending grace periods to 60 or 90 days. To get an extension, you need to call your insurer and explain how you are impacted financially. They may require supplemental documentation.
Life insurance premiums are one of the core elements of a life insurance policy, so it’s important to understand how they’re determined and how they fit into your budget. Get some free life insurance quotes to see which coverage options fit your family’s financial needs.
Premiums are what you pay the insurance company in exchange for coverage. Payments can be made monthly, quarterly, semi-annually, or annually by electronic funds transfer or check.
The cost of life insurance varies depending on your age, health, lifestyle choices, and how much life insurance coverage you’re getting.
If you miss a premium payment, most insurers offer a 30-day grace period. After that, your policy will lapse, which means you’ll lose your life insurance coverage.
For most policies, premiums stay the same. Less common policies, like annual renewable or universal life insurance, have premiums that can change.