If you’re thinking about purchasing a life insurance policy, chances are that the price of the policy is a primary consideration. But how much does life insurance cost? Well, that depends on several factors. For example:
- Your Age: Life insurance tends to be cheaper for younger individuals. As you age, the price of a life insurance policy will increase, as older individuals pose a higher risk to the insurance company.
- Your Health: Your health also plays a major role in determining the price of your life insurance. After all, if you’re in perfect health, you pose less of a risk to the insurance company than someone with pre-existing medical conditions.
- Your Gender: Historical data points to the fact that women typically live longer than men. As a result, men usually pay higher premiums for life insurance than women.
- The Type of Insurance: The type of life insurance policy you buy also plays a role in your premiums. Whole life insurance and permanent life insurance policies are usually more expensive than term life insurance.
There are other factors that play a role in the cost of life insurance. Continue reading to learn more about how life insurance companies come up with policy premiums and how much you’ll likely pay for coverage.
Understanding Different Types of Life Insurance
One of the primary factors that determine the cost of your life insurance policy is the type of policy you purchase. As mentioned above, whole life insurance is typically more expensive than term life insurance. Moreover, you may not have access to as high of a death benefit with whole life as you can access with a term life insurance policy. But cost and coverage caps aren’t the only differences between term life insurance and whole life insurance.
Term Life Insurance vs. Whole Life Insurance
Term life insurance and whole life insurance both provide a death benefit to the policy beneficiaries should the policyholder die. However, that’s where the similarities between these two products end. Here’s how term life insurance and whole life insurance differ:
- Coverage Period: Term life insurance provides a death benefit for a predetermined period of time. For example, a $500,000 20-year term life policy will pay beneficiaries $500,000 if the policyholder dies within the 20-year term. However, once the term expires, the coverage expires with it. Whole life insurance covers the policyholder for life, regardless of how long their life might last.
- Cost: Whole life insurance is usually significantly more expensive than term life insurance for the same death benefit amount.
- Cash Value: Whole life insurance builds cash value over time. You can tap into that cash value to help supplement retirement income, and you might be able to use it to cover the cost of long-term care. Term life insurance doesn’t build any cash value.
- Conversion: You can usually convert a term life insurance policy into a whole life insurance policy, as long as you do so before the conversion expiration date on your policy.
How to Decide: Which Type of Life Insurance Do You Need?
For most people, the choice between term life insurance and whole life insurance boils down to two factors:
- How Long You Want Life Insurance: If you’re a parent and only want coverage as long as your children are financially dependent on you, a term life policy may be the better option. On the other hand, if you want life insurance coverage until you die, regardless of how long that may be, a permanent life insurance policy may be best. Consider how long you’ll need coverage as you decide between the two options.
- How Much You Can Afford to Pay: Term life insurance may be significantly less expensive than whole life insurance. In fact, for many, whole life insurance is cost-prohibitive. If that’s the case for you, term life may be the better option for you.
Key Factors Influencing Life Insurance Rates
As mentioned above, there are several factors that play a role in the amount of your premium. Factors like your age, gender, health, and the type of insurance policy you purchase all play a significant role in your policy’s price. But there are other factors to consider as well. For example:
- Term Length: Your term length also plays a role. The longer the term, the larger the risk your policy poses to the insurance company. So, longer terms typically come with higher premiums.
- Coverage Amount: As with any other form of insurance, higher coverage amounts come with higher premiums.
- Tobacco Use: Tobacco is linked to several conditions that ultimately lead to death. As such, you can expect to pay a higher premium if you use tobacco than you would pay if you were tobacco-free.
- Family Medical History: Some life insurance companies may ask questions about your family medical history to determine if your policy comes with any hereditary risks. If so, you could pay higher premiums.
- Your Credit Score: Some life insurance companies may charge you higher premiums if you have poor credit. While your credit score doesn’t directly impact your policy premiums, aspects of your credit report may. For example, bankruptcy, a history of missed payments, and excessive collections could all have a negative impact on your policy premiums.
Average Costs of Life Insurance
The average cost of life insurance for a 20-year-old and a 50-year-old will be different. That’s also the case for different genders, health ratings, and more. Here’s a breakdown of various average life insurance costs based on different factors:
Average Cost of Term Life Insurance by Age and Gender
The average cost of term life insurance varies wildly for different ages and genders. See the chart below for details (figures based on the average cost of $500,000 in term life coverage with a 20-year term for preferred applicants):1
| Age | Average Annual Premium for Men | Average Annual Premium for Women |
| 30 | $220 | $183 |
| 40 | $332 | $281 |
| 50 | $817 | $641 |
| 60 | $2,361 | $1,656 |
| 70 | $9,297 | $8,204 |
As you can see from the chart above, men typically pay a noticeably higher premium than women. Moreover, premiums climb significantly as you age.
Permanent vs. Term Life Insurance: Cost Analysis
Another factor to consider is the type of life insurance you choose. If you decide to purchase a whole life insurance or permanent life insurance policy, you’ll pay higher premiums than you would for term life insurance. How much higher? The chart below shows the average annual premium associated with $500,000 in whole life coverage for preferred life insurance applicants of different ages and genders.1
| Age | Average Annual Premium for Men | Average Annual Premium for Women |
| 30 | $4,652 | $4,015 |
| 40 | $7,028 | $5,937 |
| 50 | $11,163 | $9,443 |
| 60 | $19,150 | $15,943 |
| 70 | $33,325 | $28,093 |
Other Factors to Consider
It’s important to keep in mind that any information on the average price of life insurance you get from this article are just that — averages. Ultimately, your life insurance premiums depend on various unique aspects of your life.
With that said, it’s a good idea to use a life insurance cost calculator to determine how much you’ll pay for coverage. For example, you can use the Fidelity Life Life Insurance Calculator to determine how much your insurance will cost. Simply click the “Get My Quote” button and answer a few questions about yourself for a more accurate depiction of how much money you might pay.
But keep in mind that there may be a difference between your quote and your actual premiums. After all, a quote is provided based on very basic information about you.
Tips for Reducing Life Insurance Premiums
Life insurance doesn’t have to be an expensive product. There are several things you can do to reduce your premiums. For example:
- Choose the Medical Exam Option: There are plenty of insurance options that don’t require a medical exam, but these options are often significantly more expensive than traditional life insurance options. Opt for the medical exam to potentially add a significant discount to your premiums.
- Enroll Early: Life insurance is far less expensive for young applicants than it is for older applicants. Lock in lower rates now, as you’ll pay increasingly higher premiums the longer you wait.
- Be Reasonable With Your Coverage Amount: Sure, everyone wants to leave millions of dollars behind for those they love, but chances are that you don’t need millions of dollars in life insurance. A general rule of thumb is that you should purchase coverage that’s equal to 10 years of your income. So, if you earn $50,000 per year, a $500,000 policy should be fine. If that’s too expensive, consider reducing your coverage amount. After all, some coverage is better than no coverage.
Understanding What Doesn’t Affect Your Rates
As you read articles online, you may come across common misconceptions about what impacts your life insurance rates. The truth is, if it’s not mentioned above, there’s a strong chance that it will have no bearing on the price you’ll pay for insurance.
For example, some believe that if you’re unemployed, you’ll pay less for life insurance, but that’s not necessarily the case. Believe it or not, you may actually pay more for life insurance if you’re unemployed. That’s because life insurance companies must gauge the risk associated with writing policies. Those who aren’t likely to make regular, on-time payments pose a larger risk to insurers. There is truth in the fact that if you have a dangerous job, you could pay a higher premium, but the reality is that, for most people, premiums are the same regardless of whether or not they work.
Choosing the Right Policy
There’s no question that you need life insurance. Everyone should have at least some form of life insurance to protect their loved ones. The question is, “How do you choose the right policy?” Consider these factors as you compare your policy options:
- Affordability: Price shouldn’t be the only factor you consider as you make your decision, but it’s always going to be a factor nonetheless. It’s important to choose a policy you can afford. After all, if premiums are too high, chances are you will lapse on your payments and you may lose coverage anyway. So, make sure your policy is affordable.
- Coverage Amount: Give serious consideration to the amount of coverage you need. Sure, the general rule of thumb is that you should have 10 times your income in life insurance, but there are times you can get away with less or you may need more. For example, if you want your life insurance to put your children through college if you’re not there to do so, 10 times your annual income may not be enough coverage. Moreover, if your children are already grown up and taking care of themselves, you may not need 10 times your income in coverage.
- Think of Why You Want Life Insurance: In the end, a major factor in the policy you choose is why you want life insurance in the first place. Are you interested in protecting your spouse or children? Do you want life insurance only to cover your burial, funeral, and end-of-life costs? The ultimate goal here is to choose a policy that meets your needs and is affordable.
The Bottom Line
The bottom line is that you should have a life insurance policy, however, it’s impossible to tell you exactly how much you’ll pay for coverage. Take advantage of this term life insurance calculator to help you decide how much coverage you need and how much that coverage will cost.
Finally, it may also be a wise idea to reach out to an insurance agent for personalized advice. After all, online tools can only do so much based on the limited information the tool knows about you. On the other hand, a live agent will be able to dive deeper into your needs, health status, and financial status, giving you a more well-rounded depiction of the premiums you’ll pay for life insurance.
Article Sources:
- Nerdwallet. “Average Life Insurance Rates for December 2023, https://www.nerdwallet.com/article/insurance/average-life-insurance-rates”
