The cost of life insurance: A detailed overview for your financial security
15.05.25
10
Minutes
Katrin Straub
Managing Director at nextsure
The question “How much does life insurance cost?” concerns many people who want to protect their loved ones. The answer is multifaceted and depends on individual factors. This article explores the cost structure and offers 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.
Term life insurance is often cheaper than endowment life insurance and is primarily used to provide financial protection for dependants.
Through truthful health declarations and needs-based contract design, costs can be optimised.
Cost factors of term life insurance at a glance
The monthly premiums for term life insurance vary considerably. Many individual factors determine the exact premium amount. For example, a 25-year-old non-smoker can obtain cover of €150,000 for as little as around three euros a month. The sum insured itself is a significant cost driver. The chosen term of the policy also plays a decisive role in calculating the cost. These fundamental aspects form the basis for determining the premium.
Practical examples: This is how much life insurance can cost
To make the costs more tangible, let us look at a few scenarios. For example, a 37-year-old pharmacist, a non-smoker, who wants to provide cover of two hundred and fifty thousand euros for her partner over fifteen years, pays a net contribution of around twelve euros per month. For a 32-year-old bank clerk, a non-smoker, with a decreasing sum assured starting at five hundred thousand euros to cover a property over twenty years, the costs may be around ten euros in premium payments. 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-of-life insurance.
Here are typical factors that insurers take into account:
The insured person's age when the contract is taken out.
The desired sum assured paid out in the event of death.
Contract term, i.e. the duration of the cover.
Health condition and any pre-existing conditions.
Smoking status (non-smokers often pay significantly less).
Occupation and the associated risks.
Risky hobbies such as skydiving or diving.
This list shows that a blanket answer to the question “How much does life insurance cost?” is hardly possible. An individual calculation is essential.
Calculating the correct sum insured
The level of the sum insured is a key cost factor. For families, three to five times gross annual salary is often recommended as a guideline. In the case of property financing, the remaining loan balance should be covered. An amount set too low can, in an emergency, lead to gaps in cover. A sensible term life insurance policy takes all eventualities into account. Remember ongoing costs such as rent or loans, education costs for children and general living expenses. A careful needs analysis is the first step here.
Influence of policy term and age on the premium amount
The longer the term, the higher the premiums tend to be. The entry age also plays an important role: younger policyholders generally pay less. At LV 1871, for example, the maximum entry age is 75. Early cover can therefore be financially worthwhile. The term should be chosen so that it covers the protection needs, for example until children have completed their education or a loan has been repaid. Think carefully about how long your life insurance policy should run. The recommended term for families with children is often until the youngest child has finished their education.
Health assessment and risk factors: What insurers want to know
Before taking out a term life insurance policy, a health assessment is carried out. Insurers ask for details of pre-existing conditions, height, weight and lifestyle habits such as smoking. Truthful information is essential here to avoid jeopardising your cover. Certain occupations or dangerous hobbies can lead to risk surcharges. There is no term life insurance policy completely without a health assessment, but sometimes there are simplified health questions. Even with pre-existing conditions, taking out a policy is not ruled out, but it may be more expensive.
The following aspects are typically requested:
Height and weight to determine BMI.
Smoking status (including e-cigarettes and occasional smoking).
Existing or previous serious illnesses (e.g. cancer, heart disease).
Regular medication use.
Hospital stays in recent years.
Planned stays abroad in risk areas.
Participation in high-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) regulates the rights and obligations of insurers and policyholders. The statutory minimum surrender value is set out in Section 169(3) VVG. Contributions to term life insurance can be claimed for tax purposes as provision expenses; however, the maximum amounts are often already used up by health and long-term care insurance contributions. In the event of a claim, the payout from a term life insurance policy is exempt from income tax, but inheritance tax may be due if the allowances are exceeded. Our expert tip: For unmarried couples, cross-insurance can be a sensible option to avoid inheritance tax. In this arrangement, each partner takes out a policy on the other's life. Advice on tax details is recommended. The distinction between pension insurance and life insurance is also relevant for tax purposes.
The term life insurance policy is solely intended to cover the risk of death and only pays out if the insured person dies during the policy term. No capital is accumulated for the survival benefit. An endowment life insurance policy combines death cover with a savings component; in this case, a sum is also paid out if the policyholder survives until the end of the term. As a result, the premiums for term life insurance are generally significantly lower. For pure dependants' cover, term life insurance is often the more suitable and cost-effective solution. There are also unit-linked endowment life insurance policies, where the insurance benefit depends on the performance of a fund. Sometimes an endowment life insurance policy is combined with income protection insurance.
Potential for optimisation: How you can save on your life insurance
There are several ways to optimise the cost of life insurance. Paying annually instead of in monthly instalments can result in a discount of up to five percent with many providers. Compare offers carefully, as risk assessments and therefore premiums can differ between insurers. Adjusting the sum insured to your actual needs can also save costs. A whole-of-life insurance without health questions is unusual and usually associated with disadvantages. Answering the health questions honestly is always the best approach. Remember that good advice, such as that offered by nextsure, can help you find the optimal and most cost-effective cover. This is a discreet reference to our advisory services.
In conclusion, the question “How much does life insurance cost?” must be answered on an individual basis. Use the information provided here as a basis for your decision.
Request an individual risk analysis now: Have your insurance situation checked free of charge and receive specific suggestions for optimisation.
More useful links
The German Insurance Association (GDV) offers a publication with current figures on German life insurance in 2024.
The Federal Statistical Office (Destatis) publishes a press release here on the “Figure of the Week”.
Statista provides data on the expense ratio in life insurance in Germany.
The Federal Statistical Office (Destatis) offers detailed tables on life expectancy and life tables.
The Federal Statistical Office (Destatis) provides publications on period life tables.
Wikipedia offers a comprehensive article on life insurance.
FAQ
Which factors influence the cost of life insurance the most?
The most important factors are the amount of the sum insured, the term of the contract, the entry age, the state of health and the insured person's smoking status.
Can I deduct life insurance premiums from my taxes?
Contributions to term life insurance can generally be claimed for tax purposes as deductible provision expenses. However, the maximum amounts are often already exhausted by other insurance contributions (health and long-term care insurance).
What is the difference between gross and net contribution?
The gross premium is the maximum possible premium. The net premium (amount payable) is the actual premium to be paid, which is reduced by the insurer’s profit-sharing bonuses. The net premium is usually not guaranteed for the entire term.
Do I get money back at the end of the term of a term life insurance policy?
No, a pure term life insurance policy 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 usually pay significantly higher premiums than non-smokers, as their statistical risk of death is higher. E-cigarette use is also often counted as smoking.
Is a health examination always necessary?
Yes, a medical examination or the answering of health questions is generally required to take out term life insurance. Answering these truthfully is crucial for insurance cover.
