How to manage life insurance premiums

Life insurance premiums can vary significantly between insurers and policies.

With the right information, it's easy to understand what premiums are, how they're calculated, and how to secure the right level of coverage for your situation. Whether you're looking into life insurance for the first time, or planning to change insurers, there are a few key factors to keep in mind when shopping around.

What are life insurance premiums?

Life insurance premiums are payments that are made monthly or annually to keep the insurance policy active. These payments are made to your insurance company and can increase as you get older or with inflation.

How are life insurance premiums calculated?

Life insurance premiums are usually calculated on a number of key factors, such as your health and family history, what you do for work, and the level of life insurance coverage you are looking for.

Health and family history

A big factor that can influence your life insurance premiums is your health and family history.

When working out your premiums, insurers may ask about a family history of medical conditions or health risks and they may even ask you to do a medical exam. Plus, insurers will look at things like your age, your smoking status and whether you’re navigating any conditions such as high cholesterol.

People who have a history of good health typically pay lower insurance premiums, as they are seen as having a lower chance of making a claim to insurers.

Work and lifestyle

Your occupation, smoking and drinking habits, exercise routines, and even participating in risky hobbies could impact your life insurance premiums. The higher your perceived work and lifestyle risk, the higher your rates are likely to be, and in some cases, can even restrict you from receiving coverage.

Some of the factors that can contribute to how much you pay for your life insurance premiums include:

• Working in high-risk and potentially dangerous occupations, such as construction
• Participation in high-risk activities regularly like skydiving, rock-climbing or high-adrenaline extreme sports

For example, an office worker with no history of smoking and who regularly exercises would be more likely to pay lower premiums than a construction worker who has a history of smoking and participating in skydiving.

Level of insurance coverage

Typically, the higher coverage you select, the more you will likely pay in life insurance premiums.

Consulting a financial advisor can help you figure out how much coverage you need based on your situation and budget. These professionals will assess your unique needs and risk factors, helping you to select the right level of coverage.

Premium structure

A premium structure is essentially how the cost of coverage is distributed throughout the life insurance policy term.

As Canadians, we have a few different life insurance options that come with different premium structures:

• Whole life insurance: This is a type of permanent life insurance that covers you for your entire life, with premiums that don’t change as you get older.
• Universal life insurance: Another type of permanent life insurance, this coverage combines life insurance with an investment account. This means your premiums can increase if your investment returns fall over time.
• Term life insurance: This is a more narrow type of life insurance that provides a death benefit if you pass away within a certain timeframe. Typically, premiums are less expensive than permanent life cover and your premiums vary depending on the length of your term.

How you pay

It's easy to pay for your life insurance premiums in a way that works for you. Generally, you can choose to pay monthly or annually, depending on what works best for your budget and what options are offered by your insurance company.

How can I reduce my life insurance premiums?

There are a number of things you can do to reduce your life insurance premiums. Actions like starting early, comparing coverage before you commit to a policy, and improving your health and lifestyle can all help when trying to get the best rate for your policy.

Start early

If you decide to secure life insurance coverage early on in adulthood, it can reduce the risk you present to insurers and could mean you pay lower starting premiums on your policy. Insurance companies generally consider younger applicants to be healthier and are less likely to access their life insurance in the near future.

By securing a policy early on, you can lock in lower rates and potentially save money over time. If your health changes in the future, you won’t risk missing out on the policy that’s right for you or paying even more on premiums. Getting coverage earlier in life can help secure financial protection for your loved ones, while ensuring you have lower starting premiums.

Compare coverage

Ready to weigh up your options? Comparing life insurance policies can help you make an informed decision. Here are a few key factors to consider when comparing your options:

• Premiums and payment options: Are premiums stepped or level? Can you choose to pay premiums monthly or annually?
• Coverage amount: Is the level of coverage right for you?
• Inclusions: What are you covered for, and how much will you receive in benefits?
• Exclusions: What are you not covered for?
• Waiting period: When does your coverage start and when can you make a claim?

Re-evaluating your coverage needs is also a smart option. Your life and financial needs change over time, and your life insurance should, too. Reviewing your cover regularly ensures it still aligns with your lifestyle and your future. An annual review helps to keep your policy relevant and makes sure your loved ones are protected.

Improve your health

Insurers will ask about your health history when working out your life insurance premiums, it can help to improve your health before thinking about applying for life insurance.

Steps you can take to improve your health include exercising regularly, eating a balanced diet, and ditching poor health habits (such as smoking or drinking regularly).

Some insurance companies even have programs that reward you for getting regular medical exams, tracking your steps, or ceasing unhealthy habits. If you've been working in a high-risk occupation and feel like a change, even switching jobs can reduce your lifestyle premium.

Adjust your level of coverage

You can also reduce your life insurance premiums by adjusting your life insurance coverage to fit your needs better. With NorthCover, life insurance coverage amounts range from $100,000 to $1.5 million, and the right level of coverage may depend on factors like your mortgage, income, and future expenses. If your financial situation changes, you might not need as much coverage as you did before.

How can I prevent my life insurance premiums from increasing?

Over time, life insurance premiums can increase, especially if you have a stepped premium structure. However, one way to manage this is by choosing a level premium structure. This can help keep your premiums more stable in the future.

Due to inflation or insurer adjustments, some premium increases may still happen. Reviewing your policy regularly and speaking with your insurer can ensure you have the right balance of security and affordability.

How to choose the right life insurance

Choosing the right life insurance coverage is all about considering your unique needs. Factors like your financial situation, health, and lifestyle can all come into play, and it's best to shop around to find the best life insurance policy for you.

Get a free quote for life insurance

We like to hope for the best, but preparing for the worst has its perks, too. North Cover Life Insurance can be easy to understand, simple to apply for and can help provide coverage when it’s needed most. Go ahead and get in touch for a quote from one of our licensed advisors today.