What Affects the Cost of Universal Life Insurance

When people look into universal life insurance, one of the first questions they ask is why the cost can vary so much from one person to another. Two people might apply around the same time, choose similar coverage amounts, and still receive very different pricing.

That's because universal life insurance pricing is based on multiple layers of evaluation, not just one simple factor. Below, we break down exactly what insurers look at, how those factors influence cost, and what they really mean in practical terms.

1. Age at the Time You Apply

Age is one of the most straightforward factors affecting cost, yet it's also one of the most impactful.

Life insurance pricing is based on probability. The younger you are when you apply, the lower the statistical likelihood that the insurer will need to pay a death benefit in the near future. Because of that:

• Younger applicants typically pay lower cost‑of‑insurance charges
• Policies issued earlier have more time to build cash value
• Long‑term policy sustainability is easier to maintain

As you get older, insurance becomes more expensive because:

• The risk of health issues increases
• The window for long‑term growth shortens
• Insurance charges rise more quickly over time

Even a difference of 5 –10 years can significantly affect lifetime costs.

2. Health and Medical History

Health is one of the most detailed areas insurers evaluate. This doesn't just mean whether you're "healthy" or "unhealthy," but rather how your overall medical profile compares to statistical risk models.

Insurers typically review:

• Height‑to‑weight ratio (BMI)
• Blood pressure readings
• Cholesterol levels
• Prescription medication use
• History of chronic or serious conditions
• Family history of major illnesses

For example:

• Controlled conditions (like well‑managed high blood pressure) may have minimal impact
• Ongoing or severe conditions may increase insurance charges
• Multiple risk factors combined can raise costs more than one issue alone

Good health generally leads to lower ongoing insurance charges inside the policy, which helps keep long‑term costs more predictable.

3. Lifestyle Factors

Lifestyle choices help insurers assess day‑to‑day risk, not just medical history.

Common lifestyle factors include:

• Tobacco or nicotine use (including vaping)
• Alcohol use history
• Driving record (in some cases)
• Occupational risks

Tobacco use is one of the most influential lifestyle factors. Even occasional use can affect pricing because it statistically increases long‑term health risks.

Lifestyle doesn't automatically disqualify someone, but it often determines how much risk the insurer is taking on, which directly affects cost.

4. Participation in Hazardous Activities

This is one area that often confuses readers, so clarity is important.

"Hazardous activities" generally refer to recreational or professional activities that carry a higher risk of serious injury or death. These are not everyday hobbies.

Examples may include:

• Skydiving or BASE jumping
• Scuba diving beyond recreational limits
• Rock or mountain climbing
• Aviation as a private pilot
• Competitive motorsports
• Certain extreme endurance events

Occasional participation may be treated differently than frequent or professional involvement. Insurers usually want to know:

• How often the activity is performed
• Whether it's recreational or professional
• Whether safety certifications or training are involved

In some cases, insurers may:

• Increase policy costs
• Exclude certain risks
• Request additional documentation

The key point: not all hobbies are hazardous, and being upfront helps ensure accurate pricing.

5. Amount of Coverage (Death Benefit)

The death benefit is the amount paid to beneficiaries, and it plays a direct role in cost.

Higher coverage amounts mean:

• Greater financial responsibility for the insurer
• Higher cost‑of‑insurance charges
• Greater funding requirements over time

Choosing coverage should be based on:

• Income replacement needs
• Debt obligations
• Family or dependent support
• Long‑term financial goals

Over‑insuring can raise costs unnecessarily, while under‑insuring can leave gaps in protection. The goal is to match coverage to real needs, not guesses.

6. Policy Design and Death Benefit Structure

Universal life policies can be structured in different ways, and each structure affects cost.

For example:

• Level death benefit policies generally cost less over time
• Increasing death benefit policies often require more funding

The structure determines how the policy behaves as cash value grows and how insurance charges are calculated internally.

Design choices should align with whether the policy is meant for:

• Pure protection
• Long‑term planning
• Estate strategies

7. Premium Flexibility and Funding Strategy

Premium flexibility is a benefit — but it must be used correctly.

Universal life allows policyholders to:

• Pay more during high‑income years
• Reduce payments during tight periods
• Adjust contributions over time

However, consistently underfunding a policy can:

• Reduce cash value
• Increase future costs
• Shorten the policy's lifespan

Well‑funded policies are generally more stable and less vulnerable to rising insurance charges later in life.

8. Cash Value Growth Expectations

Cash value growth helps offset insurance costs, but assumptions matter.

Growth depends on:

• Interest crediting methods
• Market performance (if applicable)
• Policy expenses

If growth underperforms expectations, additional funding may be required to keep the policy active. Conservative planning helps reduce surprises and keeps costs manageable.

9. Policy Fees and Internal Charges

All universal life policies include internal costs, such as:

• Cost‑of‑insurance charges
• Administrative fees
• Expense loads

These costs vary by insurer and policy type. Understanding them helps explain why two similar policies may have different long‑term costs.

10. Length of Coverage and Long‑Term Planning

Policies designed to last longer require more planning.

Coverage intended to:

• Last a lifetime
• Support estate planning
• Extend into later retirement years

…must account for rising insurance costs over time. Planning early and funding appropriately helps keep long‑term affordability intact.

What This Means for You

The cost of universal life insurance goes well beyond age and coverage alone. Factors such as health, lifestyle choices, hobbies, policy design, and long‑term funding strategies all influence pricing. Understanding these elements helps individuals make smarter decisions and choose coverage that aligns with both their needs and their budget.