The Cost of Life Insurance: What Are the Criteria for Calculating the Insurance Premium?

To take out life insurance, the policyholder must bear an economic commitment, called the premium, to the insurance company. Following the payment of this premium, the insurance company assumes the risk of the insured person's death, guaranteeing financial protection to the beneficiaries if the event specified in the contract occurs.

But how is the cost of a life insurance policy calculated?

To calculate the amount of the insurance premium, companies must consider certain criteria, including:

• age, lifestyle, and physical condition of the insured;
• the capital to be insured;
• duration of the contract;
• any additional guarantees.

Lifestyle and Health Conditions

Before signing the contract, insurance companies submit a questionnaire, in which the client must communicate, in addition to their age, their health conditions and lifestyle. This way, the company can create a profile of the insured person and calculate the probabilities of the death event occurring. The higher these probabilities, the higher the premium amount the policyholder will have to pay.

For example, if the person who wants to take out a life insurance policy is a smoker, they will have to bear a significantly higher cost than another insured person who has never smoked in their life.
The same applies to workers who practice dangerous professions or people who engage in extreme sports in their free time.

The cost of the policy is also determined by age and clinical condition, and in certain cases, even by the presence of particular hereditary diseases in the family.

The Capital to Be Insured

The same applies to the capital to be insured: the higher the amount, the higher the cost for risk coverage.
To know the right amount to insure according to your needs, our online calculator can be helpful.

The Duration of the Contract

The duration of the contract, on the other hand, affects the total cost as the longer the coverage period, the higher the amount to be paid.

Additional Guarantees

Companies offer clients standard insurance plans, to which it is possible to add specific guarantees, concerning, for example, accidents or terminal illnesses, which affect the initial rate.

Payment Methods

Additionally, premium payment methods are variable. Generally, it is possible to pay a life insurance policy by:

• paying the total amount at the beginning of the coverage period;
• monthly, semi-annual, or annual installments;
• an initial part and subsequently additional premiums at regular intervals.