Why Do Life Insurance Premiums Increase?

Life insurance premiums increase is some insurance policies and not in others, depending on the type of life insurance contract.

One thing that does increase each year is the mortality cost (the chance of the insured person dying). How the increasing mortality cost is dealt with has a large impact on the premium you pay for your life insurance policy.

For example with a 5 year renewable term life insurance plan you pay a level premium for 5 years and the excess over the yearly cost ii invested to smooth out the premium.

With a permanent level life insurance premium plan the insurance company actuaries do a calculation based on factors including morality cost and expense interest rate. They need an end so age 100 is often used, expecting most people to live at most 100 years. The calculation determines how much is needed to be pay on a level premium base.

So, premiums remain level for the entire duration of a permanent life insurance policy, but premiums increase after a set period of time for a term life insurance policy, which is why level term life insurance costs much less for a short period of time up to 30 years compared to permanent life insurance.

Here's how you can compare term life insurance versus permanent life insurance