What is the cost of life insurance?

Younger people typically face lower life insurance premiums due to their longer life expectancies and lower risk of illness. Since premiums can increase with every year, making an early purchase can often be advantageous. This trend becomes more noticeable after 50 when premiums can rise more steeply.

Statistics show that women generally live longer than men.³ This usually means lower premiums for women.

Smokers usually pay significantly higher cost of life insurance premiums. This is because of , the increased health risks associated with smoking, even just for occasional use of cigarettes, cigars or vaping products.

Underwriting commonly includes a medical exam noting key health indicators like height, weight and cholesterol levels. Well-managed health conditions can lead to more favourable rates while “no exam” policies may cost more.

Engaging in high-risk professions such as mining, construction, or firefighting, where the risk of injury or death is higher, often results in higher insurance costs compared to less hazardous occupations.

High-risk activities, such as car racing, scuba diving or rock climbing, can lead to higher life insurance premiums.

A family history of serious illnesses like cancer or stroke can increase your premiums.

Since the insurer is taking on a greater risk, your policy’s face value—the amount paid-out when you die—means you’ll generally pay a higher premium.

The type of life insurance policy you choose affects your premium. Term life insurance covers a fixed period and is considered the more affordable option. On the other hand, permanent whole life coverage covers you for the rest of your life and accumulates cash value. You can withdraw and borrow against this cash value to supplement income or cover other costs later.

For term life insurance, the duration of coverage is also a factor. Longer terms generally cost more than shorter terms because they extend the period during which the insurer might be required to pay the death benefit.

Additional options like convertibility (converting from a term to a permanent policy without further medical examination) or renewability (renewing the policy at the end of its term without requalifying) can increase policy cost. These features add flexibility for the policyholder but also increase the insurer’s risk.

Premiums can be level (the same throughout the term), increasing or decreasing. Level premiums are typically higher initially than increasing premiums but can be more cost-effective over the life of the policy.

Adding riders—like those for accidental death, child insurance or critical illness —can provide additional benefits but also increase the premium cost since they expand the coverage.

Calculate how many years of financial support your family would need if you were no longer able to provide for them. For instance, if you earn $60,000 annually and want to support your family for ten years after your death, you will likely want at least $600,000 in coverage.

Add up all your debts, including mortgage, car loans, credit cards and other liabilities. Ensure your life insurance coverage is enough to clear these debts so they don’t burden your family.

If you have children, consider the costs of their education. Include potential college or university fees to help cover the cost.

Consider the costs of funeral expenses and any potential outstanding medical bills at the time of death. These can often amount to tens of thousands of dollars.

Additional insurance can help cover estate taxes costs without requiring your heirs to liquidate assets.

Beyond just replacing income, consider what it will take to maintain your family’s current lifestyle. This can include the cost of extracurricular activities, home maintenance and anything else they regularly enjoy.

Consider the impact of inflation on future financial needs, especially if you are planning long-term. This ensures that the life insurance payout maintains its purchasing power over time.