Calculating Life Insurance Costs

If you’re looking for a straightforward answer to the question ‘how much does life insurance cost?’, you’re not alone. And if you’re searching the internet in hopes of finding an answer, then you’re one of the millions of confused people doing the very same.

The unfortunate thing is, many people don’t find the answer they’re looking for. In fact, many find that there is no straightforward answer - in fact, life insurance costs are different for everyone based on their personal circumstances. Put simply, giving you the average cost of life insurance isn’t going to help - instead, we want to give you an estimate that meets your needs.

Now, that might not be the answer you wanted, but you can rest assured that working out how much life insurance you need and how much it will cost you is much easier than you might think.

How much life insurance do I need? 

How much life insurance you need depends on what you would like the benefit amount to cover and how long you need it to last. If you’re taking out insurance to protect your partner or family against outstanding mortgage payments, you should work out how much they will need to pay off your mortgage in the event of your death. Not only that but how long it will take before your mortgage is taken care of so that you can choose the right term.

If you want a policy that will help your family maintain the same standard of living and keep up with household bills, then you need to calculate how much it costs to maintain your household and your family’s lifestyle. Consider how long the money will need to last. If you want to get more for your money, you should compare providers. You could find you’ll get more cover for the same price by comparing deals, meaning the benefit amount could potentially last longer without having to pay extra in premiums.

If you want your benefit amount to help cover end of life expenses or the cost of your funeral, then you need to consider how much you would like to contribute towards these costs.

Taking this advice into account, you can go ahead and grab a paper and pen and get to work. Or, if you want to make things a little easier you can always use our handy Life Insurance Calculator. 

Here are some factors to consider when choosing a benefit amount:

  • Your age
  • The age of your children 
  • How many years your family will need financial support for
  • Your mortgage or monthly rent costs
  • Your outgoings per month (childcare, transport, groceries, and other expenses)
  • Your salary and other sources of money like savings or investments
  • Your debts, things like bills, loans and credit cards

Deciding on a term

Deciding on a term i.e. a period of time during which you are covered is key to getting adequate cover without overpaying. Choosing too short a term could leave your loved ones vulnerable while choosing too long a term could mean you’re paying for your policy when there is no longer any need

Do you want to add optional extras?

You may wish to add optional extras like Children’s Cover, Accidental Death Cover or Critical Illness. Optional extras can add an extra layer of protection to your policy. If this is the case you need to work out how much more this will cost on top of your original premium amount. If you decide to compare policies, you should look out for which providers offer optional extras.

Are there ways to cut life insurance costs?

Besides carefully calculating costs to avoid paying for too much insurance, there is another way to help reduce the cost of your policy; If you understand how life insurance premiums are calculated, you might be able to make certain changes that could potentially result in lower premiums. Considering the factors that affect life insurance costs, you may be able to decrease the cost of your policy.

But how does this work?

How are life insurance premiums calculated?

The cost of life insurance premiums and the benefit amount available to you will usually depend on three things; your age, your health and your lifestyle. This is because the cost of your premiums are affected by how much risk an insurer is taking to cover you. Figuring this out comes down to a process called underwriting. The underwriting process involves assessing the amount of risk an individual poses to the insurer. They can use this information to determine how much a policyholder should pay in exchange for cover.

If you’re in perfect health, you don’t smoke, your BMI is normal and you don’t have any pre-existing medical conditions then fantastic, you can likely secure an average rate of premiums. If you smoke, or you’re overweight or in poor health, you might find it difficult to secure a cheaper life insurance policy since there is more risk for the insurer to cover you.

The same goes for those who are in the older age bracket. When we’re older we’re more susceptible to illnesses associated with old age which means premiums are usually quite high if you want a large benefit amount. Underwriters will try to determine your life expectancy based on the information you provide. That’s why it can be a good idea to look into Over 50s policies for affordable premiums.

The fact is, if you’re young, in good health and you don’t smoke, you could possibly secure a larger benefit amount for cheaper, and while you can’t change your age, it is possible to change your lifestyle. Shedding a few pounds, getting fit and quitting smoking can mean a reduced rate of monthly premiums. No matter what state your health is in, you can always compare policies if you want to save money in the long run.

Planning and research can save you money

With some careful planning, research and a little bit of time spent comparing the best deals, you can get a better deal on your life insurance policy. If you’re ready to get serious about securing life insurance, you can start comparing the leading UK insurers with Choozi.


Compare, choose and buy life insurance with Choozi