Cost of life insurance

Loads of factors will affect the average life insurance cost, from lifestyle and overall health to occupation. But you do have a say in what you pay.

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How much cover do I need?

How much you pay for life insurance per month will depend on your personal circumstances and how much cover you need. Remember there are a number of factors that will affect your monthly premiums:

  • the amount of cover you need
  • the type of policy (the length and whether it is a single or joint policy)
  • the life insurance term
  • your age
  • your health 
  • your lifestyle - including whether or not you're a smoker

The simplest way to estimate how much cover you may need is to use our life insurance calculator.

If you believe you need life cover, then consider a policy from the Post Office today.

Different types of insurance carry different costs

During the initial stages of an application, you will be asked which kind of life insurance you want. Usually, your options will be decreasing term, level term and increasing term policies. When finding out what life insurance costs, this decision will have a large effect.

Decreasing cover

Decreasing term cover is typically used to cover loans like repayment mortgages. With decreasing policies, the amount the policy pays out goes down during its lifetime, along similar lines to the reductions in your mortgage as you pay it off. Of the three main term policy types, decreasing policies tend to carry the lowest premiums.*

Check that the rate at which the payout of your decreasing term insurance policy reduces is appropriate for the % interest rate of your loan.

(For example, Post Office Decreasing Life Insurance is appropriate for loan interest rates up to 8%.)

Level cover

Level term cover provides a cash lump sum upon your death which your beneficiaries can use to settle debts, continue to contribute towards their lifestyle or to spend however they wish.

This type of life insurance could be used to provide a cash sum for your family or to help cover an interest-only mortgage.

Increasing cover

Increasing term cover operates in a similar way as level term. However, with increasing cover the payout increases annually to help counteract the effects of inflation and protect the value of the payout over time. For this reason, increasing term premiums go up each year and this type of policy tends to have the highest monthly premiums.

*Importantly, this will all be determined by the needs and circumstances of the individual. It is entirely possible that one person’s decreasing term policy has higher monthly premiums than another person’s increasing term policy.

For decreasing and level term insurance policies, how much you pay for life insurance each month will remain the same throughout the policy. There are insurance policies whereby you pay initially low premiums that increase with time, however these can end up being very expensive as time goes by.

How do I calculate my premiums?

When you make your application, you can decide either how much you wish to pay each month – which, combined with the desired length of your policy and the type of insurance you want, will give you a projected payout – or you can decide the size of your payout. In the latter case, the insurer will then work out an average life insurance cost spread over monthly premiums.

Since it’s difficult to determine an average life insurance cost for everyone, you will need to assess what your personal needs and circumstances are to get an accurate life insurance estimate. You'll need to factor in lots of expenses, like your mortgage if you've got one, your cost of living, the type of insurance you need, the size of the payout you want, any savings you've built up, and many other lifestyle factors that you may not have considered - such as fees for lessons your kids take, or the sale of one of your cars. As a rule of thumb, lower payouts tend to mean lower premiums.

Life insurance premiums are also based on the risk the policy holder poses to the insurer. Therefore, the higher the risk, the higher the premiums. More detail is given on what is considered higher risk below.

Average cost of life insurance

It's hard to put a number on the average cost of life insurance policies as everyone's needs are so different. If you think about the needs you currently have and compare them to those of your parents or children, they will probably differ wildly. However, you may both want the same type of insurance policy.

The important factors that insurers will need to know about your health include:

  • age
  • height
  • weight
  • status as a smoker or non-smoker
  • family medical history
  • lifestyle concerns (such as alcohol consumption)
  • any known diseases or disorders
  • whether you have or have had diagnosed mental health issues.

This isn't an exhaustive list, and different insurers may have other criteria and differing levels of scrutiny.

Your profession may also play a role when assessing risk for an insurer. Someone whose job involves working in dangerous environments – such as around explosives – will find that how much they pay for life insurance each month is higher than (for example) a primary school teacher.

How can you improve your life insurance estimate?

If you want to reduce how much you will pay for life insurance per month, you might need to do some projections for the time at which you take out your policy. For example, if you are a smoker and you quit smoking the week before taking out a life insurance policy, this is very unlikely to have a positive effect on your premiums. Most insurers will require you to have been an ex-smoker for at least a year before it will be reflected in your premiums. (Bear in mind that ‘smoking’ includes all nicotine products, including patches and e-cigarettes.)

The same logic applies to all lifestyle habits. If you were to reduce your alcohol intake or lose weight, the amount you could pay for premiums may be less when you look at policies than it would have been if you hadn't made those changes. It’s important that you do this before taking out a life insurance policy, as it is very difficult to alter the size of your premiums once a policy is taken out.

There are things that you can control and things you can’t. Your age, for example, is (unfortunately) only going to move in one direction. As it is also likely that you will suffer fewer health problems at a younger age, your premiums may be lower the earlier you take out a life insurance policy.

Do bear in mind, though, that term life products have a defined lifetime. Since life insurance policies only pay out upon your death, taking out a thirty-year policy on your 18th birthday will hopefully not be advisable, even if the premiums are attractively low at this time.

Life insurance will have different costs depending on what stage of life you’re at and what your financial situation is. If it is something you are considering, then use our life insurance calculator a few times, altering the variables that you have control over, to find out the type and amount of cover you need. From this, you could to be able to judge the average cost of life insurance for you.

See our range of life cover to help you protect what matters most

Our life cover products

Post Office Life Insurance

Give your loved ones peace of mind with a life policy.

Post Office Over 50s Life Cover

Help loved ones with the cost of your funeral and other small expenses with an over 50s policy.