How are life insurance premiums calculated?

A life insurance premium is the amount of money you pay regularly to keep your life insurance policy active. This payment ensures that your loved ones will receive money (the cover amount) if you pass away while the policy is in force.

The premium is like a fee you pay to keep your life insurance coverage. It helps the insurance company manage its costs and ensure they can pay out claims when needed. It’s made up of a few key fees:

• Base premium. This is the main cost of the insurance, determined by your age, health, and lifestyle.
• Add-ons, which may increase your premium.
• Administrative costs that the insurance company may charge to cover their office costs.
• Guaranteed premiums, which stay the same throughout the policy term, making it easy to budget.

If you’re ever unsure about the terms of your life insurance policy, we’re here to help, however we do not give advice. If you would like advice, you can visit unbiased.co.uk for help finding an independent adviser. Learn more about life insurance policies. Find out more about how life insurance works.

You pay your life insurance premium, and, in return, your insurer will cover you for the amount and terms in your policy. 

Several factors affect how your life insurance premiums are calculated:

• Age. Younger people usually pay less because they are less likely to make early claims.
• Health. Your medical history and current health are very important. The insurance company might ask for a medical exam.
• Lifestyle. Activities like smoking or dangerous hobbies can increase your premiums.
• Type of policy. Different policies have different costs. For example, whole life insurance is generally more expensive than term life insurance because it covers you for your entire life.
• Cover amount. The more coverage you need, the higher your premium will be.

To start exploring your options and possibly find a policy that meets your needs, you can visit our life insurance product page. You can also use our life insurance calculator to help you work out how much life insurance you might need. It only takes a few minutes, but it could make a huge difference to your life insurance journey.