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How much does life insurance cost?
It’s natural to assume million-dollar life insurance policies cost a fortune, but the fact is, you can get substantial coverage at an extremely affordable rate—probably more affordable than you’d think.
Here’s an example: Healthy, non-smoking spouses in their 40s who choose term life insurance could get a half million dollars in coverage for less than $1/day each. That’s a small price to pay for the relief of knowing your family has a financial safeguard in place in the case of your passing.
Term Life Cost vs. Permanent Life Cost: What’s the difference?
Typically, people choose between two types of life insurance: term life or permanent life (sometimes referred to as whole life insurance). One of the biggest differences between the two is the price tag.
+ Term Life Insurance is the Most Affordable Option
For a person in excellent health, monthly premiums run, on average, from $20 – $40 a month for a benefit of up to $500,000. Policies are sold for finite lengths of time—typically up to 30 years. Most term life policies feature “guaranteed level” premiums, meaning you pay the same premium for the length of your policy, but the premium can also be paid annually (often at a discount). At the end of the term length, the policy is canceled or can be renewed, and if you pass away while the policy is active, the beneficiaries you designate receive the coverage value set.
+ A Permanent Life Insurance Policy Literally Lasts a Lifetime
Premiums can also be fixed but can be as much as 10 times higher than term life. At the time of your passing, your designated beneficiaries receive a fixed benefit set at the time you purchased your policy. Permanent life policies have a cash value. With every premium payment, a portion is placed into a savings component that you can borrow against (within the rules set by the provider).
How are life insurance rates determined?
The underwriting process uses several factors to figure your monthly premium:
The Type of Policy You Choose
Term life policies are typically more affordable than permanent life policies. Term life premiums are fixed while permanent life premiums tend to increase about 8% to 10% for every year of age.
The Amount of Benefit You Choose
You can typically expect to pay a higher monthly premium when you choose a higher benefit to be paid to your beneficiaries.
The Length of Your Term Life Policy
The longer your term, the more expensive your monthly premium can be. This is because the longer you have the policy, the older you get and the greater the chance that the insurance company will have to pay out the death benefit.
Your Health at the Time of Purchase
Most applicants must have a basic medical checkup. Some factors that might result in higher premiums include high blood pressure, high cholesterol, HIV/AIDS and hepatitis, hypoglycemia, chronic illness, nicotine use or recreational drug use.
Your Age at the Time of Purchase
Older individuals can expect to pay a higher premium for both term and permanent life insurance.
Your Hobbies at the Time of Purchase
Do you enjoy extreme sports like hang gliding, skiing or climbing? No surprise, you’re a bigger insurance risk, so you may pay a higher premium for both term and permanent life insurance.
Your Gender
On average, men can expect to pay higher premiums than women because the average lifespan of a male tends to be shorter than that of a female.
Things You Can Do to Lower Your Life Insurance Rates
There are a few things you can do to help lower the premium amounts you’ll pay for life insurance. Many of them involve healthy habits that do so much more than just saving you money:
Apply sooner rather than later.
The cost of life insurance goes up the older you are, so a person in their 20s or 30s will pay much less for the same type of coverage than a person in their 40s and 50s. Younger people are also less likely to have chronic health conditions that often cause life insurance premiums to increase.
Stay on top of your medical conditions.
If you have a chronic condition, such as high blood pressure or diabetes, make sure you’re monitoring your status and following your treatment plan. Be sure to regularly check in with your doctor and let them know if your condition changes or if any medications you’re on no longer manage your condition.
Maintain a healthy weight.
Staying within a healthy weight range can help make you less of a risk to insurance companies. Being overweight is also associated with chronic conditions that come with higher mortality rates, such as heart disease. Work with your doctor to find out what a healthy weight range is for you and work to achieve it.
Quit smoking.
Tobacco use means higher life insurance premiums. You can lower your rate the longer you are tobacco-free. Note: this also includes e-cigarettes, as insurance companies view them as just as harmful as smoking.
Limit or avoid high-risk hobbies.
Frequent participation in high-risk hobbies like scuba diving, rock climbing and skydiving make you more risky to insurance companies. If you limit these activities, your life insurance rate might be lower.
Still have questions? We’re here to help:
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The easiest way to learn more about your options for life insurance rates is by letting us help. We can quickly help you determine what kind of policy is best for you and what might have an impact on your rates.
