How much does life insurance cost?

How much does life insurance cost?

The cost of life insurance is calculated using several factors, including your age, gender, overall health, lifestyle, the type and length of the policy and the amount of coverage you purchase. The average cost of life insurance largely depends on your risk of mortality. This usually means that younger and healthier individuals pay lower rates. Typically, adult women are cheaper to insure, as well, since they tend to have a longer life expectancy than adult men, according to the Centers for Disease Control (CDC).

You might notice the absence of specific life insurance rates on our site, and there's a reason for this. Life insurance is highly personalized, more so than auto or homeowners insurance. This means that aggregated rates are not only challenging to compile but might also not reflect your individual circumstances. While some insurers might offer average costs for certain policy types, these figures may not accurately represent what you would pay, as premiums can vary significantly based on factors such as age, health, gender, lifestyle and the type of policy chosen. Your rates will also vary depending on whether you choose whole, term or another type of life insurance.

Generally, life insurance companies do not report proprietary premium data (other than the total amount of premium they write in a year). The process of pricing life insurance involves gathering private health data; revealing average rates could mean jeopardizing the privacy of a company’s insureds. For example, a company with higher average life insurance rates may insure older policyholders, policyholders in poor health or a combination of the two.

If you want to know how much life insurance is, you might want to collect a few quotes to get a general sense of how much to budget for it. When gathering quotes from multiple companies, make sure that you’re getting quotes for the same policy type and coverage amount. That way, you can ensure you’re making an apples-to-apples comparison. It’s also important that you disclose any health or lifestyle factors if asked on a quoting tool or application, otherwise, the quotes you receive won’t be accurate or helpful.

What factors impact your life insurance cost?

Life insurance providers assess several factors to determine coverage eligibility and to estimate premiums. Gaining an understanding of how life insurance providers price premiums can offer valuable insight into what your rate might be.

Life insurance rates are based on the risk of a company paying out the death benefit. This means that anything that increases your risk of mortality will likely increase your rates. Through medical exams, health questionnaires and other underwriting processes, insurance companies are able to determine how much of a risk you present. Always be honest when you fill out this information. If you lie about your health status, you run the risk of your policy being canceled, your death benefit payout being denied when you pass away or being held accountable for life insurance fraud.

Here are some factors that determine your life insurance rates:

• Health: Your health plays a huge role in the cost of life insurance. If you have chronic health issues that increase your risk of mortality, you’re likely to pay a higher life insurance rate. However, guaranteed-issue life policies may be an option for customers with more severe health problems who want to forgo a medical exam.
• Gender: Men statistically have a lower life expectancy than women, which means they represent a higher risk to life insurance companies. Based on this, life insurance costs are typically more expensive for males than females of the same age and health.
• Age: Age is one of the strongest indicators of mortality, so the older you are, the more you’ll likely pay for life insurance. This is why many financial experts recommend that you buy coverage when you are young, so you can potentially secure a cheaper life insurance rate.
• Death benefit amount: Another factor affecting the cost of life insurance is the amount of coverage you need. A higher death benefit will cost more to purchase since the life insurance company is agreeing to pay out more upon your death. If you aren’t sure how much coverage you need, working with a licensed insurance agent or using a life insurance calculator may be helpful.
• Job: What you do for a living can also impact how much you pay for life insurance. If you are in a dangerous profession, such as piloting, war reporting or law enforcement, you could have a greater mortality risk. Because of this, you might pay a bit more for life insurance.
• Lifestyle: Your lifestyle can also impact your life insurance cost. You will likely pay more for life insurance if you drink alcohol regularly or participate in high-risk activities such as skydiving due to the increased risk of death associated with these activities. Additionally, traveling to war zones is considered a major risk by most life insurers and could lead to your policy application being denied.
• Type of life insurance: There are several types of life insurance you can choose from. Term life insurance provides coverage for a set period of time. Because of this, rates are generally cheaper than other types of policies. Permanent life insurance, including whole life and universal life, is designed to last your entire life — maximum coverage age ranging from 95 to 121. This means that the insurance company is far more likely to pay out the death benefit than it would with a term policy. Permanent life policy rates are typically higher to compensate for this and their cash value feature.

What doesn’t impact your life insurance premium?

Although there are many factors that contribute to your life insurance premium, there are also some criteria that don’t impact costs.

• Location: Unlike with auto or home insurance, your location will not affect the cost of your life insurance. You will need to provide your address on the life insurance application, but it has no impact on the cost.
• Credit score: Life insurance companies use a credit-based insurance score derived from your credit report, which is different from your standard credit score. This score helps assess risk, similar to the method used by auto and home insurers.
• Marital status: In almost every state, your insurance company can factor in your marital status when determining your auto and homeowners insurance premiums. However, marital status is not a rating factor for life insurance.
• Race or sexual orientation: Insurance companies do not factor race or sexual orientation to calculate rates, no matter the type of coverage.
• The number of beneficiaries you name: The number of life insurance beneficiaries you choose does not impact your premium. Still, you will have to decide how much of the death payout each beneficiary receives (and how they receive it). You can elect that your beneficiaries receive equal portions of your death benefit or grant each a specific percentage. Some life insurance policyholders may prefer their death benefit be paid as a lump sum, while others opt for installments. Regardless, these choices will not impact your rate.
• The number of life insurance policies you have: There are no laws that say you can’t carry multiple life insurance policies, and some people choose to have more than one. You will, of course, be paying more combined premiums if you carry multiple life insurance policies, but each policy does not affect the other.

Life insurance companies care most about factors that impact your life expectancy, such as your current health and family medical history, which could contribute to health issues in the future. If an insurance company believes you have an increased risk of passing away prematurely, you’ll see a higher rate that reflects that risk.

Also, unlike auto insurance, life insurance policies are not subject to regular renewal periods, such as every 6 or 12 months, which can affect your premiums. For example, if you have an auto policy and get into an accident, your rates are likely to increase at the next renewal. In contrast, with term and whole life insurance, once your policy is in place, your rates remain the same. This means that even if you start smoking after purchasing your life insurance policy, your premiums will not increase.

How much life insurance do I need?

Determining the right amount of life insurance coverage depends on your unique circumstances and financial goals. Key factors include the number of dependents, lifestyle expenses, current financial situation and long-term objectives. For instance, if you have young children and are the sole income provider, you may need significant coverage. Conversely, if you're single with no debt, you may not even need life insurance.

Life insurance policies offer a wide range of coverage amounts, from $100,000 to tens of millions. According to the American Council of Life Insurers (ACLI), 90 million American families rely on life insurance for financial security. Individual life insurance accounts for 63 percent of all life insurance in the United States, with average policy sizes increasing from $165,000 in 2013 to $206,000 in 2023. These average policy sizes (face amounts) include all forms of individual life insurance, such as term and various types of permanent. It is more common for the average person to buy smaller amounts of permanent life compared to term insurance due to its costs and function.

At what age should I buy life insurance?

The right age to purchase a life insurance policy varies for everyone — and some people won’t ever have a need for life insurance — but buying a policy when you are younger generally results in lower premiums. Early purchase helps protect your insurability, especially if you have a family history of health problems. Securing a policy early can lock in a lower premium and provide more options than might be available later in life.

It’s important to note that if you purchase a term policy when you are younger, there's a possibility that you might outlive your coverage. In such cases, you may need to either convert your term policy to a permanent one, renew the coverage or purchase a new policy if you need continued financial protection. Starting your policy early is usually beneficial for long-term financial planning and stability.