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How Life Insurance Rates are Determined

By July 21, 2020 February 26th, 2021 Advisor, Blog, Consumer, News
how life insurance rates are determined

It can be difficult to think about the future and what could happen to your loved ones should you pass away. When making any big decision in your life, it’s always critical to do your research in order to choose the best option. Purchasing life insurance is no different. It’s important to understand the ins and outs, especially when it comes to providing your loved ones with the financial protection they may need. Part of that can be discovering how life insurance providers determine rates.

Do your homework when shopping around for the best plan. Affordability is important and comparing what you are getting in return for the premiums paid. It’s in your best interest to understand how your health and lifestyle choices will affect your rates and what type of life insurance works best for your situation and budget.

Factors Affecting Life Insurance Rates


At any age, it’s important to seize the opportunity to get savings on your life insurance plan. Typically, the older you are, the higher your rates will be, since age affects your health. However, there are other age-related factors that affect your rates such as:

Age nearest – which is your age on the birthday you are closest to

Age last – also known as Actual age – It is your current age at time of application

The difference between age nearest and actual age may seem small (a few months). However, this can significantly affect your premiums – what the insurer pays either monthly or annually for their policy.

Most life insurance providers have their plans priced in specific age bands or ranges.

Depending on the age of when you apply, you may not qualify for all life insurance plans. To ensure you get the right life insurance product for a desirable rate, this should be an incentive to not put it off – as you get older, premiums are likely going to increase.

For instance, if you’re 50 years old, then you may only be able to qualify for life insurance plans designed for this age group. However, if you’re turning 50 in a little over six months you may want to lock in your rates at age 49 prior to the six month mark to take advantage of a plan with lower rates.

Personal Health

Your health at the time of completing the life insurance application is an important consideration for life insurance providers. Your current health, if you have an illness or disease, or a newly discovered underlying health issue can all affect your life insurance policy rates. Life insurance providers will look at your health history to determine if you have had any illnesses, diseases, or have been treated for any medical issues. Applying earlier in your life makes it more likely that you’ll have a cleaner medical history.

It’s important to lock in your rates, by purchasing life insurance while you are still healthy. Later in life you may face challenges qualifying due to poor health or obtaining a policy may not be as affordable.

Family Health History

Contrary to popular belief, buying life insurance early isn’t always about your own health. It is also about securing protection even before your family’s health deteriorates.

Family health refers to your parents and sibling’s health. Life insurance providers look at your family history for diseases and illnesses. This is important because these predispositions can put you at an increased risk of also being diagnosed with similar diseases at some point in your lifetime.

Take into consideration that while your own health may be optimal now, life insurance providers will also put into question your family’s health. As your family members age, more health issues can arise. This leads to greater risk and can result in a higher premium.


Smoking has a higher correlation to mortality, which means if you do smoke, you’re at higher risk of disease or premature death. Every life insurance provider classifies smoking differently, and your rates will be affected depending on how they classify a smoker. If you do smoke, it’s important to do your homework and understand what life insurance providers constitute as a smoker.

Here are examples that highlight how life insurance providers may differ when defining a smoker depending on the type of plan and rates you are applying for:

i) Even if you smoked one time, four months ago at a social engagement, you may not consider yourself a smoker, yet, some life insurance providers will, and you’ll pay smoker rates.

ii) Some life insurance providers consider a person who smokes marijuana a smoker, while others have become more liberal in their views when consuming the substance. Other providers may allow individuals to maintain non-smoker status if they smoke marijuana less than a specified number of times per week.


Gender is another factor that life insurance providers will use when determining life insurance rates and other living benefits such as critical illness insurance.

The average life expectancy for men in Canada is 79.8 years and for women 83.9 years which demonstrates that men typically have a shorter lifespan on average than women.1 Life insurance providers take these health statistics into account when determining rates. This is part of the reason why women on average (all things being equal) pay lower rates for life insurance than men.

Meanwhile, when looking at premiums for living benefits such as critical illness insurance these can be affected by gender disparities as well in critical illness incidence rates.

How Types of Life Insurance Affects Premiums

When deciding which life insurance option to choose, you can opt for either permanent or term plans. Many life insurance providers will work with you to complete a needs base analysis to help you understand which type is best for your unique situation, using information that you provide. You can always have the option of doing this analysis on your own or with help from your insurance advisor.

Your rates may increase based on the amount of coverage you need to financially protect your loved ones. Where would you need to allocate your funds and resources? A few common debts and expenses that can be covered with a death benefit include:

  • Outstanding mortgage balance
  • Funeral and final expenses
  • Children’s education
  • Personal loans

To illustrate the difference between life insurance options, consider the concept of owning or renting a home. Owning a home can be equated to having a permanent life insurance policy. You make your mortgage payments and have the comforts of the home for the duration of your life. In contrast, having a term life insurance policy is similar to renting a home. You get to enjoy the comforts of the home for a specified period, but keep in mind that once the lease is up, you have the option of renewing or ending the term.

Permanent life insurance usually has higher premiums. While term has lower premiums, and depending on your plan, the term will come to an end at a specific time. At this point, you can make the decision to renew your policy.

If your needs change, then depending on the plan, you may be able to convert your term policy into a permanent one without providing any evidence of health. Keep in mind if you successfully pay off larger expenses, a term plan may provide the desired protection, and you may not require coverage for the full duration of your life.

Why it’s Better to Apply for Life Insurance Earlier in Life

There are many reasons why applying for life insurance earlier in your life can be beneficial:

  • Lock in your rates while you’re healthy
  • Rates are not only more affordable, but underwriting life insurance can be more lenient
  • The application process is very fast since you likely don’t have a complicated medical history
  • Young people are getting diagnosed with illness/disease earlier in their lives2

The benefits of choosing no medical life insurance earlier in your life, is that it may not cost as much as you may think. In fact, compared to traditional life insurance, premiums may only be slightly more.

Is life insurance right for you?

The right life insurance plan can give you peace of mind knowing that your loved ones will be financially protected. Naturally, rates can be an important consideration for people when shopping around for life insurance. By understanding how life insurance rates are determined, and the value and benefits that you are getting in return, may help in your decision.

Curious what your rates may be? Try our Quick Quote or speak with your advisor or contact Canada Protection Plan for a no-obligation life insurance quote.
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Canada Protection Plan is one of Canada’s leading providers of No Medical and Simplified Issue Life Insurance. Our mission is to provide reliable protection and compassionate service from coast to coast with easy-to-purchase life insurance, critical illness insurance and related products. Our expanding product choices will help you get the coverage and peace of mind you need for a better financial future. Canada Protection Plan products are available through over 25,000 independent insurance advisors across Canada.
To learn more about Canada Protection Plan and our line of comprehensive No Medical and Simplified Issue life insurance solutions, call Broker Services at 1-877-796-9090 and we will be happy to assist you or put you in contact with Sales support in your region.

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