What factors affect the cost of your life insurance premium?

A life insurance premium is a monthly payment you make to your insurer in exchange for your life cover. There are a few aspects that influence the cost of this premium.

The younger you are, the cheaper your premium is.

It is always a good idea to take out life insurance when you are young. Not only are you and your loved ones protected early on, but your premium is cheaper. This is because you represent less of a risk to the insurer, and you are more likely to be in better health. Also, the earlier you start paying for life insurance, the more affordable your premiums will be when you are older, provided you make sure that the premiums remain affordable over the years.  

Your health plays a role in the price of your premium, as does your lifestyle.

If you have certain health issues or have suffered from a severe illness or injury, then the cost of your premium will most likely be higher. You could also be subject to certain exclusions on your policy. The monthly amount you pay for your life insurance policy is also influenced by your lifestyle. For example, do you have a job that is considered dangerous, such as being a police officer? Or do you frequently enjoy participating in activities that have a high likelihood of injuries, such as sky diving or rock climbing? Being a smoker or vaper can also result in you paying a much higher premium, as this is a risk to your health.

Your life insurance premium depends on the duration you need the cover for, and how much cover you want.

With life insurance, you can have different layers of cover within your policy, for example, an amount that covers long-term expenses like a bond. When that bond is paid off, though, you no longer need that layer of cover, which can reduce your premium. Your monthly premium also depends on how much cover you want. As a general rule, the more cover you take out, the higher the premium. It is best to talk to a financial adviser about how to balance what you can afford to pay each month and how much life insurance you need.

Before taking out a life insurance policy, make sure you know how much your future premiums will be.

When taking out life cover, you need to consider not just what you will be paying now, but what you will be paying in the future. Some policies offer cheap premiums in the short term but may require you to pay much more as you get older. It is a good idea to consider what kind of increases you think you will be able to afford in the future. For example, if your salary only goes up by 5% every year, an annual premium increase of 15% is not affordable. Life insurance cover is designed to be a policy that you keep for an extended period, so it isn’t ideal to have to change providers regularly, so when you do change your life insurance provider, it’s important to understand how much you’ll be paying in the long-term. Your life insurer is required to include premium projections in your insurance quotation, so be sure to ask for them.   

A financial adviser can help you

Insurance products can be pretty complicated. Making the wrong decision can have serious consequences for you and your family, so it’s worthwhile to shop around for the best advice. Fortunately, many well-qualified financial advisers can answer your questions, provide clear explanations, and help you understand what you’re buying when it comes to life insurance. Financial advisers must meet strict regulatory requirements and be properly licensed with the Financial Sector Conduct Authority (FSCA) and product providers.  You have the right to ask your adviser for their credentials and ask whether they are independent or work for a specific product provider.

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