Costs of Life Insurance: A Detailed Overview for Your Financial Security
15 May 2025
6
Minutes
Katrin Straub
CEO at nextsure
The question "How much does life insurance cost?" is a concern for many who want to protect their loved ones. The answer is complex and depends on individual factors. This article sheds light on the cost structure and provides you with practical recommendations.
The topic in brief and concise terms
The cost of life insurance depends on many factors, including the sum insured, term, age, and health.
A term life insurance is often cheaper than a whole life insurance and primarily serves to secure the financial future of dependents.
By providing truthful health information and tailoring contracts to needs, costs can be optimized.
Cost factors of a term life insurance at a glance
The monthly premiums for a term life insurance policy vary greatly. Many individual factors determine the exact premium amount. A 25-year-old non-smoker, for example, can obtain coverage of one hundred fifty thousand euros for as little as three euros per month. The sum insured itself is a major cost driver. The chosen term of the contract also plays a crucial role in cost calculation. These fundamental aspects form the basis for further premium consideration.
Practical Examples: How much can a life insurance policy cost
To give a clearer idea of the costs, let's consider some scenarios. A 37-year-old pharmacist, non-smoker, who wishes to provide coverage for their partner with two hundred fifty thousand euros over fifteen years, pays a net premium of around twelve euros per month. For a 32-year-old bank clerk, non-smoker, with a decreasing sum insured initially of five hundred thousand euros for property protection over twenty years, the costs can be about ten euros premium payment. These examples illustrate the range of possible premiums. It is advisable to compare different types of life insurance. The costs of term life insurance are often lower than those of whole life insurance.
Here are typical factors that insurers consider:
Age of the insured at the time of policy issue.
Desired sum assured to be paid out in the event of death.
Policy term, meaning the duration of the coverage.
Health status and any pre-existing conditions.
Smoking status (non-smokers often pay significantly less).
Occupation and associated risks.
Hazardous hobbies such as skydiving or diving.
This list shows that there is hardly a simple answer to the question "How much does life insurance cost?" A personalised calculation is essential.
Calculating the insurance sum correctly
The amount of the insurance sum is a central cost factor. For families, it is often recommended to use three to five times the gross annual salary as a guideline. In the case of real estate financing, the remaining debt of the loan should be secured. A sum set too low can lead to coverage gaps in an emergency. A sensible term life insurance considers all eventualities. Consider ongoing costs such as rent or loans, education costs for children, and general living expenses. A thorough needs analysis is the first step here.
Impact of duration and age on the contribution amount
The longer the contract term, the higher the premiums tend to be. The entry age also plays a significant role: younger policyholders generally pay less. At LV 1871, for example, the maximum entry age is 75 years. An early coverage can therefore be financially beneficial. The term should be chosen to cover the need for protection, for example until children have completed their education or a loan is paid off. Think carefully about how long your life insurance should last. The recommended term for families with children is often until the end of the youngest child's education.
Health Check and Risk Factors: What Insurers Want to Know
Before taking out a term life insurance policy, a health check is conducted. Insurers inquire about details such as pre-existing conditions, height, weight, and lifestyle habits like smoking. Truthful information is essential here to avoid jeopardising the insurance cover. Certain occupations or dangerous hobbies may lead to risk surcharges. There is no term life insurance completely without a health check, but sometimes simplified health questions are asked. Even with pre-existing conditions, taking out a policy is not excluded, but it may become more expensive.
The following aspects are typically inquired about:
Height and weight to determine BMI.
Smoking status (including e-cigarettes and occasional smoking).
Existing or previous serious illnesses (e.g. cancer, heart diseases).
Regular medication intake.
Hospital stays in recent years.
Planned stays abroad in risk areas.
Participation in risk sports or dangerous occupational activities.
This information helps the insurer assess your individual risk.
Expert Depth: Legal Framework and Tax Aspects
The Insurance Contract Act (VVG) governs the rights and obligations of insurers and policyholders. The statutory minimum surrender value is stipulated in Section 169, paragraph three of the VVG. Contributions to term life insurance can be claimed as tax-deductible expenses; however, the maximum amounts are often already exhausted by health and nursing care insurance contributions. In the event of a claim, payouts from term life insurance are exempt from income tax, but inheritance tax may apply if the allowances are exceeded. Our expert tip: For unmarried couples, a cross-insurance can be useful to avoid inheritance tax. In this case, each partner takes out a policy on the other's life. Consultation on tax details is advisable. The distinction between annuity and life insurance is also relevant for tax purposes.
Differences: Risk versus Endowment Insurance
A term life insurance policy serves purely to cover the risk of death and only pays out if the insured person dies during the term of the contract. No capital is formed for survival benefits. An endowment life insurance combines death protection with a savings process; in this case, a sum is also paid out at the end of the term if the policyholder survives. As a result, the premiums for term life insurance are usually significantly cheaper. For pure financial protection of dependents, term life insurance is often the more suitable and cost-effective solution. There are also unit-linked endowment life insurances, where the insurance benefit depends on the performance of a fund. Sometimes an endowment life insurance is combined with a disability insurance.
Optimization potential: How you can save money on your life insurance
More useful links
Gesamtverband der Deutschen Versicherungswirtschaft (GDV) offers a publication with current figures on German life insurance in 2024.
Statistisches Bundesamt (Destatis) publishes a press release here on the 'Number of the Week'.
Statista provides data on the administrative cost ratio in life insurance in Germany.
Statistisches Bundesamt (Destatis) offers detailed tables on life expectancy and mortality tables.
Statistisches Bundesamt (Destatis) provides publications on period mortality tables.
Wikipedia offers a comprehensive article on the topic of life insurance.
FAQ
What factors most influence the cost of life insurance?
The key factors are the amount of coverage, the contract term, the entry age, the health condition, and the smoking status of the insured person.
Can I deduct life insurance contributions from my taxes?
Contributions to term life insurance can generally be claimed as tax-deductible expenses. However, the maximum amounts are often already exhausted by other insurance contributions (health and nursing care insurance).
What is the difference between gross and net contribution?
The gross premium is the maximum possible premium. The net premium (paid premium) is the actual premium to be paid, which is reduced by the insurer's surplus participation. The net premium is usually not guaranteed for the entire term.
Will I get money back at the end of the term of a term life insurance policy?
No, a pure term life insurance only pays out in the event of the insured person's death during the policy term. There is no payout at the end of the term if the insured event has not occurred.
How does smoking affect the cost of life insurance?
Smokers generally pay significantly higher premiums than non-smokers due to their statistically higher risk of death. Vaping is often also considered smoking.
Is a health check always necessary?
Yes, taking out a term life insurance policy usually requires a health examination or answering health-related questions. Truthful responses are crucial for insurance coverage.
