The type of life insurance you choose and the coverage amount are major factors in determining life insurance costs. Whole life and term life are the most common, according to the American Council of Life Insurers — and both have significantly different costs.
How much does life insurance cost?
Term life insurance rates are cheaper because the policy only lasts for a specific period compared to whole life, which is designed to last your entire life. The policy doesn’t build cash value like whole life does. It only provides a death benefit to your beneficiary if you die during the term length, usually between 10 and 30 years.
In the table below, we compared the average cost of term and whole life insurance policies with a $500,000 face value amount. For example, a healthy 30-year-old female would pay an average life insurance cost per month of $28 for a 30-year term policy. The same coverage for a whole life policy would cost an average of $352 monthly, or almost 13 times the cost of term life.
What factors affect life insurance rates?
Insurance companies use multiple risk factors to determine the cost of a life insurance policy. Besides the type of policy and amount of coverage, the criteria below play a significant role in how much life insurance is:
- Age: Generally speaking, the younger you are when you apply for life insurance, the cheaper your premium will be.
- Gender: Males have shorter life expectancies than females, so they tend to pay more for the same coverage.
- Height and weight: People who are overweight are typically at higher risk of developing medical conditions that could shorten their life, such as high blood pressure, Type 2 diabetes or heart disease, all of which usually result in higher policy premiums.
- Health history: As a rule of thumb, the healthier you are, the less you’ll pay for life insurance. People with preexisting health conditions may find it harder to be approved for life insurance and could pay higher rates.
- Family medical history: If there are health issues in your immediate family or someone died before their life expectancy from poor health, it could cause higher premiums.
- Tobacco and marijuana use: If you smoke, vape, chew tobacco or smoke marijuana, your rates will be higher than a nonsmoker, in most cases.
- Risky lifestyle habits or occupation: If your job is dangerous, such as police officer, firefighter or lineman, your rates would be higher than a receptionist or cashier. The same goes for risky hobbies like base jumping, skydiving or flying planes.
- Your insurer: The rate you’re quoted for a life insurance policy will vary depending on the insurer.
Cost of term life insurance by age
Female term life insurance policy rates
Male term life insurance policy rates
Cost of term life insurance by term length
The longer your term length, the more your term life insurance costs. We compared average life insurance rates in the tables below, divided by term length, for males and females (ages 30, 40, and 50) ranging from $250,000 in coverage to $2 million.
10-year term life insurance policy
20-year term life insurance policy
30-year term life insurance policy
Cost of whole life insurance by age
You’ll pay more for whole life insurance than term life because it lasts your lifetime and builds cash value. The tables below show average whole life insurance premiums by gender and age.
Female whole life insurance policy rates
Male whole life insurance policy rates
Cost of life insurance without a medical exam
If you don’t want to go through the traditional underwriting process, you might have the option of purchasing no-exam life insurance, which are typically term policies with more relaxed application processes.
“Insurers can use technology advancements and underwriting innovations to access health records in real-time during the application process to determine eligibility,” said Andrew Doerman, vice president of digital distribution and strategy at Legal & General America.
You might benefit the most from life insurance without a medical exam if you have a high-risk occupation or preexisting medical condition.
Although no-exam life insurance is easier than getting a policy that requires a medical exam, you might end up paying more for it. The insurer is taking on the risk of your unknown state of health, and they typically respond to that by charging you more for your policy.
How much life insurance do you need?
How much life insurance you need will vary depending on your life stage and whether someone depends on you for financial support. Additionally, you need to consider why you’re getting the policy. There are many reasons why people buy life insurance, including:
- To replace Income
- To pay for funeral costs and final expenses
- To pay off debts such as a mortgage and student loans
- To allow your spouse to stay home with your children instead of having to return to work
- To cover college education for your children
- To cover costs to care for a lifelong dependent, such as a child with a disability
If you are young, just starting your family or the sole income earner, you may need substantial life insurance since your family might depend on your income. Term life insurance is the most cost-effective solution, as it provides substantial coverage amounts for relatively affordable rates.
However, if you’re nearing retirement age, your mortgage is paid off and you have no other outstanding debts, you might only need a small amount of life insurance to pay for your final expenses. A whole life guaranteed issue policy may be a better fit, in this case.
Once you get a sense of why you want to buy life insurance, you can apply one of several popular formulas for calculating how much coverage you need:
The DIME method
Using the DIME formula, you calculate your Debts, Income, Mortgage and Education needs. Determine how many years you want to provide for your family and multiply that by your annual income. Total up your debts, including your mortgage payoff. Then, factor in how much you expect to need for your children’s college expenses.
10 times your salary
This general rule of thumb is the simplest way to purchase life insurance. Although this doesn’t factor into your expenses and gets to the bottom of your actual needs, it can provide a safety net for your family after you die.
10 times your salary, plus college education
If you want to ensure your kids can attend college, consider adding around $45,000 to $165,000 per child to the salary method, depending on where your child wants to attend school.
Value of life calculator
The value of life calculator considers your annual earned income, tax rate, current savings and life insurance coverage, other assets and how many years you have until retirement. After entering these figures into a calculatoryou’ll receive a value estimate to help you determine your coverage needs.
Use a financial professional
You can also work with a financial professional or life insurance agent to determine your needs. Most life insurance companies offer life insurance calculators on their website that you can use as another option.
How to lower your life insurance rates
There are several ways that you can lower your life insurance rates, such as:
- Buy life insurance now: “You’re never going to be younger and healthier than you are today, so locking in a policy when you’re younger helps keep premium rates lower than waiting and aging into more expensive policies,” Doerman said.
- Choose term life insurance: Term is usually the cheapest life insurance option available.
- Work on your health: Smoking and health risks can dramatically increase your average cost of life insurance.
- Shop around for life insurance quotes: Every life insurance company calculates premiums differently. Comparing the same coverage amount and policy type from at least three different companies can help you find the best rates.
Frequently asked questions (FAQs)
Yes. Universal life and variable life policies typically have premiums that can change over time depending on your financial situation. Whole life and term life usually have fixed premiums, although certain term policies like annual renewable term life may incrementally charge you more each time you renew.
Term life insurance is often cheaper than whole life insurance because it doesn’t build cash value and has an expiration date. If you outlive the term, the policy expires, and you no longer have life insurance. Whole life insurance has a cash value component with guaranteed growth and a guaranteed death benefit that stays in place until you die, as long as you continue to make premium payments.
The longer the term length, the more you’ll pay for life insurance. Premiums are based on how likely the insurer will have to pay out the death benefit claim: You have a greater chance of dying in the next 30 years than the next 10, so you’ll pay more for a longer term length.
Although no-exam life insurance is convenient, it will likely raise your premium much higher than if you bought a similar policy that requires a medical exam. Since the insurance company can’t use your medical exam results to determine the cost of life insurance, you could pay more for coverage to make up for the insurer’s increased risk. If you are in generally good health and don’t have any serious preexisting medical issues, the fully underwritten life insurance process might help you get lower rates.
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