Life insurance premiums vary dramatically from person to person. What you pay depends on numerous factors that insurers use to assess your risk. Understanding what affects your premium helps you make informed decisions and potentially lower your costs. This guide explains the key factors that determine life insurance costs in Canada.
Table of contents
Age and gender
Health and medical history
Lifestyle factors
Type and amount of coverage
Policy features and riders
Insurer and policy type
How to potentially lower your premiums
Age and gender
Age is the most significant factor affecting life insurance premiums.
Age and premiums:
Premiums increase significantly with age. A 30-year-old pays substantially less than a 40-year-old for the same coverage, and a 50-year-old pays more still. This reflects the statistical increased risk of death at older ages. Insurers have detailed mortality tables showing death rates by age.
Gender differences:
Women generally pay lower premiums than men. This reflects statistical differences in longevity—women tend to live longer than men, making them lower risk for life insurance. The difference can be 10-30% depending on age and coverage type.
Age-related patterns:
Premiums increase most dramatically in your 50s and 60s. Many people buy life insurance in their 30s and 40s when costs are lower. Waiting until you're older means paying significantly higher premiums.
Impact of policy type:
Age affects term and permanent insurance differently. Term premiums increase with age at each renewal. Permanent insurance premiums are locked in when you purchase—getting coverage when you're younger locks in lower rates.
Application age vs. issue age:
Your premium is based on your age when the policy is issued. Some policies allow you to lock in rates before the policy actually begins. This can be valuable if you're close to your next birthday.
Health and medical history
Your health status significantly impacts your life insurance rates.
Medical exam results:
Most life insurance requires a medical exam. The exam measures height, weight, blood pressure, and collects blood and urine samples. Results are used to assess your health risk.
Medical history:
Insurers review your personal medical history and family medical history. Conditions like heart disease, diabetes, cancer, and mental health conditions affect your rates. Family history of early death from certain conditions can also impact rates.
Pre-existing conditions:
Many health conditions affect your premiums—sometimes significantly. Common conditions that increase rates include high blood pressure, high cholesterol, diabetes, heart conditions, cancer history, obesity, and mental health conditions.
Tobacco use:
Tobacco users pay significantly higher premiums—often two to three times more than non-users. Most insurers test for tobacco presence in blood or urine. Some insurers classify vaping and nicotine use the same as smoking.
Prescription medications:
Insurers review your prescription drug history. Certain medications indicate health conditions that affect rates. The medication itself may not be the issue—the underlying condition is what matters.
Health ratings:
Based on the medical exam and history, insurers assign a health rating—Preferred Plus, Preferred, Standard, or sub-standard ratings. Each rating level has different premium ranges. The difference between Preferred Plus and Standard can be 50% or more.
Improving health before applying:
If your health has improved since a previous application or if you've made positive changes, you might get better rates. Some insurers allow repeat applications. Working on health factors like weight, exercise, and blood pressure can improve your rates.
Lifestyle factors
Your lifestyle choices affect your insurance costs.
Occupation:
Certain occupations are riskier than others. Jobs with higher injury or death rates result in higher premiums. Some occupations may be excluded from coverage. Dangerous hobbies also increase risk.
Avocation:
Risky hobbies like rock climbing, scuba diving, skydiving, and motor racing increase premiums. Some activities may be excluded entirely. You may need a special rider to cover activities that would otherwise be excluded.
Driving record:
A poor driving record indicates higher risk. DWIs, multiple accidents, and license suspensions all increase your life insurance rates. This is especially relevant for policies that include accidental death benefits.
Family history:
Your family's medical history affects your rates. A family history of early death from heart disease, cancer, or other conditions can increase your premiums. Family history is less important as you get older.
Residence:
Where you live affects your rates. Some areas have higher mortality rates due to environmental factors, crime rates, or other risks. Rural vs. urban residence can affect rates.
Travel patterns:
Frequent travel to dangerous areas can increase your premiums. Some insurers exclude coverage for deaths occurring in certain countries or regions.
Type and amount of coverage
What kind and how much insurance you buy affects your premium.
Term length:
Longer term policies cost more than shorter terms. A 30-year term costs more than a 10-year term because the insurer is providing protection for longer. However, per-year costs are lower for longer terms.
Coverage amount:
More coverage means higher premiums. The relationship is generally linear—twice the coverage costs roughly twice as much.
Term vs. permanent:
Permanent insurance (whole life, universal life) costs significantly more than term insurance for the same death benefit. Permanent insurance includes a cash value component and provides lifetime coverage.
Whole life types:
Different types of whole life have different costs. Participating policies may have higher premiums than non-participating. Policies with higher cash value components cost more.
Universal life flexibility:
Universal life policies have flexible premium structures—paying more builds more cash value. However, paying too little can cause the policy to lapse.
Policy features and riders
Optional features and riders affect your premium.
Convertibility:
Term policies with conversion options cost more than non-convertible policies. The conversion option provides valuable flexibility.
Waiver of premium:
This rider waives premiums if you become totally disabled. This adds cost but provides valuable protection.
Accelerated death benefit:
This allows you to access part of your death benefit if you're diagnosed with a terminal illness. It's often included at no additional cost.
Child rider coverage:
Coverage for children attached to a parent policy adds a small cost.
Accidental death benefit:
This adds coverage if death is due to accident. It increases your premium but can provide valuable protection.
Spouse/partner coverage:
Adding coverage for a spouse or partner increases your premium but may be cheaper than separate policies.
Cost of living rider:
This increases your coverage over time to keep pace with inflation. It adds cost but maintains your protection's value.
Insurer and policy type
Different insurers charge different rates for similar coverage.
Insurer variation:
Insurers use different underwriting guidelines and have different risk tolerances. One insurer may offer better rates for certain health conditions or occupations. Premiums can vary 50% or more for identical coverage from different insurers.
Insurer size and type:
Different types of insurers may have different pricing. Traditional insurers, mutual insurers, and online insurers may have different cost structures that affect pricing.
Policy type differences:
Term life insurance is generally available from all insurers at similar prices. Permanent insurance pricing varies more because policies have different investment components and guarantees.
Broker vs. direct:
Buying through a broker doesn't cost more and gives access to multiple insurers. A broker can help you find the best rate for your situation.
Group insurance:
Employer group life insurance typically has lower per-unit costs than individual policies. However, group coverage is usually limited and may not continue if you leave your employer.
How to potentially lower your premiums
Several strategies can help you get lower rates.
Buy when you're younger:
The best time to buy life insurance is when you're young and healthy. Premiums are lowest, and you lock in rates for the future.
Improve your health:
If you're overweight, quitting smoking, exercising more, and improving your health can result in better rates. Some insurers allow repeat applications if your health has improved.
Choose appropriate coverage:
Don't buy more coverage than you need. Term insurance is sufficient for most situations. Choose a term length that matches your needs.
Consider higher deductibles:
Some policies offer higher deductible options that reduce premiums. Consider whether a higher deductible makes sense for your situation.
Shop around:
Get quotes from multiple insurers. Prices vary significantly. A broker can help you compare options easily.
Take advantage of discounts:
Ask about all available discounts—multi-policy discounts, annual payment discounts, and others. Discounts vary by insurer.
Consider policy type:
If you need coverage for a specific period, term insurance is usually the best value. Only buy permanent insurance if you have permanent needs.
Maintain a clean driving record:
A clean driving record helps keep rates lower, especially for policies with accidental death benefits.
Life insurance premiums are determined by numerous factors. While you can't change some factors like age and gender, you can take steps to get the best possible rates—buying early, maintaining good health, shopping around, and choosing appropriate coverage.