How Much Does Life Insurance Cost?

If you’re wondering “How much does life insurance cost?” then you’ve come to the right place. The cost of life insurance depends on your age, health, and other factors, which we’ll explain in further detail. At TermLife2Go, our goal is to help you navigate the different aspects of life insurance, so you can get the best life insurance for your needs.

But let’s get one thing out of the way first. The truth is that life insurance probably costs less than you think. In fact, most people overestimate the cost of a life insurance policy by about three times the actual cost.1

So if you’ve been avoiding getting the life insurance your family needs because of cost-related worries, we are here to help demystify the process and set the record straight.

We’ll help you navigate the various life insurance options to help you find an affordable life insurance policy that best fits your needs.

Types of Life Insurance: Term vs. Whole Life

The price of your life insurance will ultimately depend on the type of life insurance policy you choose. So, let’s dig into the two main different types of life insurance policies, namely term life insurance and whole life insurance. From there, you’ll understand how the type of life insurance influences the premiums you’ll pay.

What is term life insurance?

Term life insurance is temporary and covers you for a specific period, such as 10, 20, or 30 years. With level term life insurance, the face amount (or death benefit) and premiums are fixed, and your policy terminates when the term ends.

Decreasing term life insurance is another type of policy where the premiums are usually fixed but the death benefit decreases over time as you age. With increasing term life insurance, the death benefit increases each year along with the premiums. It’s important to understand how term life insurance policies differ, so you can choose a policy that works for you.

Most term life policies provide the option of extending the term with an annual renewal. But keep in mind that as you age, the premium will rise with each renewal. Term life insurance is less expensive than whole life insurance because the policy has no cash value.

Keep in mind that one option is a no medical exam term life insurance policy. This means you can skip a medical exam, and in many cases spend much less time answering medical-related questions than what’s required for whole life insurance. If you’re looking for the quickest and easiest option to obtain life insurance, then a no medical exam term life policy may be your best bet.

What is whole life insurance?

Whole life insurance is permanent and covers you for your entire life. The face amount is established at the time of purchase and the premium is usually fixed during the life of the policy. Unlike term life insurance, whole life insurance allocates a portion of your premiums to investments that build cash value. With whole life insurance, you can rest easy knowing that you’re covered for life, as long as the premiums are paid.

Universal life insurance is another kind of permanent insurance that provides coverage throughout your life but premiums and death benefit amounts are flexible. Like whole life insurance, your policy builds cash value, and you may borrow against it while you’re still alive.

With a universal life policy, the cost of insurance (COI), or minimum premium amount, increases as you age. Money paid that exceeds the COI, contributes to the policy’s accumulating cash value.

Check out a sample chart to get an estimate on universal life insurance costs.

Benefits of Term Life Insurance Benefits of Whole Life Insurance
Options for no medical exam Lifelong coverage
Less Expensive Fixed premiums
Relatively easy to obtain and flexible terms Cash value
Things to Consider with Term life insurance Things to Consider with Whole Life Insurance
No cash value Usually more expensive than term life
Covers a specific period of time Likely requires a medical exam or answering medical questions

How much does term life insurance cost?

Life insurance premiums are based on several variables, including your age, health, occupation, and the policy face amount, which is the lump sum death benefit paid to your beneficiaries when you die. With term life insurance, you’re likely to find less expensive insurance, but it carries no cash value.

For example, the 20-year term life insurance cost for a 35-year-old man in good health could be $430 for $500,000 of coverage. The policy carries no cash value and only covers you for the 20-year span. Find out more about the different life insurance policies and which type of policy fits your needs.

How much does whole life insurance cost?

 Just like term life insurance, the cost of whole life insurance depends on your age, health, occupation, and the policy face amount. With whole life insurance, you may need to answer more health-related questions or take a medical exam.

If we go back to our example of a 35-year-old man in good health, the cost of whole life insurance will probably be significantly higher for whole life insurance than it would be for term life insurance. That 35-year-old-man may pay about $4,400 per year.2

It’s important to remember that a term life policy offers no cash value and only covers you for a stated period of time, while whole life covers you for your entire life and typically accrues cash value.

What factors contribute to the cost of life insurance?

Life insurance rates are based on certain aspects that insurers view as risk factors. Think about auto insurance, for example. Most teenage drivers are inexperienced behind the wheel and are more likely than seasoned drivers to have an accident. So, insurance companies view teenagers as a bigger risk and charge higher premiums accordingly.

Let’s look at homeowners insurance as another example. If your house is located on a flood plain, an insurance company will view you as a higher risk compared to other homeowners who don’t live on a flood plain. Therefore, you’re likely to be charged a higher premium based on this risk factor.

Like home and auto insurers, life insurance companies consider the risks of insuring you and calculate premium amounts based on different factors:

  • Age
  • Gender
  • Occupation
  • Health
  • Face amount

Although there may be other things to consider, these are the primary factors. So, let’s take a closer look at each of these and how they can affect your rates.

Age

The most important factor in determining the cost of your life insurance is age. The older you are, the more you will pay for a new life insurance policy. Of course, no one can predict when death will occur. But as each year passes, we’re all inching closer to our life expectancy age. It makes sense that the older you are, the more expensive you are to insure.

You may be able to save money by purchasing a policy in your 30s rather than your 50s. To learn more about how age affects the cost of life insurance premiums, read life insurance rates by age.

Gender

Statistics show that women generally outlive men. In the U.S., the average life expectancy for a woman is 81 years, while a man is expected to live to the age of 76.3 Since men have shorter life spans, they can expect to pay more for life insurance than women—about 38% more.4 Also, compared to women, more men have dangerous occupations, such as police officers, firefighters, and construction workers. For these reasons, insurance companies charge men higher premiums.

Occupation

Occupation type is another contributing factor to the cost of life insurance. Since certain occupations are dangerous, insurance companies face a greater possibility of paying out on early deaths. According to the Bureau of Labor Statistics, the fatality rate for U.S. workers in general is 3.6 per 100,000 people.5 But with high-risk professions, the number of deaths is significantly higher.

For example, logging worker fatalities is 135.9 per 100,000.5 Again, life insurance rates are based on life expectancy. So, if you work in a dangerous profession, your mortality rate is higher, and you can expect to pay higher premiums due to the risks involved. Here’s a list of other jobs that insurance companies consider risky:

  • Firefighter
  • Police officer
  • Airline pilot
  • Construction worker
  • Miner
  • Roofer
  • Truck driver
  • Commercial fisherman

Health

Your health and health history are also important for insurers to evaluate before determining the cost of your premium. Insurers want to know about your current health and lifestyle, as well as your health history. For example, if you have a family history of heart disease, high blood pressure, breast cancer, diabetes, or other illnesses and diseases, you can expect to pay more for life insurance. Also, if you smoke, you will pay about three times more than a non-smoker.6

The healthier you are, the more money you will save on life insurance. If you have preexisting conditions or health issues, we can help you find a company that provides life insurance with no medical exam.

Face amount

The face amount of an insurance policy is the lump sum death benefit that an insurer pays to a policy owner’s beneficiaries. The higher the face amount, the more you pay in premiums. However, the more coverage you purchase, the cheaper the price is per unit, which results in a price break.

For example, a 42-year-old healthy male could pay $22 per month for a $250,000 20-year term life insurance policy; or $37 per month for the same policy with a higher face amount of $500,000. The first unit of $250,000 in coverage costs $22 per month and the next $250,000 is $15 per month—a savings of nearly 32% on the second unit of $250,000.

How much does 20-year term life insurance cost?

The cost of a 20-year term life insurance policy varies depending on the factors we outlined above. But we can give you ballpark figures in the table below. You may be surprised to learn that the million-dollar life insurance policy cost for a healthy, 30-year-old man is about $35 per month!

Ages $250,000 $500,000 $1,000,000 $2,000,000
20 12.98 20.29 34.27 66.35
30 13.22 20.38 34.99 68.08
40 17.91 28.92 51.99 104.15
50 41.96 76.86 143.84 287.52
60 111.56 207.96 400.83 801.66
65 214.86 401.27 764.98 1529.96

All quotes are based on a preferred plus male as of January 31, 2017.

How much does 30-year term life insurance cost?

Again, the cost of a 30 year term life insurance policy will vary based certain factors. In the table below, we can give you rough estimates for a healthy male at various ages with four different policy face amounts.

Ages $250,000 $500,000 $1,000,000 $2,000,000
20 15.23 24.36 42.36 79.17
30 20.39 33.65 59.63 116.26
40 30.94 53.15 101.72 199.30
50 73.06 134.35 259.26 510.65
55 133.56 258.98 487.34 969.15

 All quotes are based on a preferred plus male as of January 17, 2017.

How much life insurance do I need?

You probably need life insurance if you have a spouse, children, or other family members that depend on you financially. But, how do you determine how much life insurance coverage you need? First, ask yourself this question, “How much money does my family need to survive each month—and for how many years—if I am not around?”

For example, if your monthly income contribution to the family is $3,000, your insurance death benefit should replace that amount, at a minimum, for a specific number of years.

In addition to monthly living expenses, consider what else you may want the payout to cover, such as a mortgage and other debts, medical and funeral expenses, or your kids’ college tuition. Estimate future expenses and come up with an amount that will sustain your family moving forward.

What are my life insurance premium payment options?

Most companies offer monthly, quarterly or annual payment options. Although paying monthly is the most common option, you may want to consider paying annually to get a discount and save a few bucks. Companies tend to charge more for frequent payments to cover administrative costs for billing and processing.

For example, if your annual premium is $3,00 that breaks down to $25 per month. But if you choose monthly installments instead, the insurance company might charge you $30, an increase of $5 per month. Making an annual payment can add up to big savings over the life of the policy. Paying once a year is usually the cheapest option.

Can I get life insurance to pay for my funeral?

People are motivated to purchase life insurance for different reasons. They may want the money used to pay off debts, to leave an inheritance for a loved one, or to pay for a college education. But another reason that people purchase life insurance is because they simply don’t want to burden their families with funeral costs.

Did you know the average cost of a funeral is more than $7,000?7 This can include burial costs, cremation, funeral services, outstanding medical bills, and more. Life insurance policies can help alleviate the financial burden of funeral and burial costs for your loved ones.

How do I shop for life insurance?

At TermLife2Go, our focus is to provide you with life insurance options and help you find an affordable policy with one of the best life insurance companies. We have saved our clients thousands of dollars over the life of their policies, and we look forward to helping you too. Call us today at 888-234-8376!

Sources:

 1 LIMRA, “Consumers Overestimate Cost of Life Insurance By Nearly Three Times

2 CNN Money, “Ultimate Guide to Retirement

3 Statista, “Life Expectancy in North America in 2017

4 Insurance Quotes, “Men pay 38% more for life insurance than women

5 Bureau of Labor Statistics, “National Census of Fatal Occupational Injuries in 2016

6 Insurance Quotes, “Men pay 38% more for life insurance than women

7 National Funeral Directors Association, “Statistics

 

 

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