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How much does life insurance cost?
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Life insurance can provide financial assistance to your loved ones after you pass away. But how much does life insurance cost? The answer isn’t straightforward, as it depends on several factors like your age, gender and health, chosen death benefit amount and other policy selections. There are multiple types of life insurance policies as well, all with different costs. Bankrate’s insurance editorial team — which includes a licensed life insurance agent — walks you through the details surrounding life insurance costs, so you can feel prepared to choose an option that works for you.
How much is life insurance?
The cost of life insurance depends on several factors, including your age, gender, overall health, the type and term of the policy, and how much coverage you purchase. Generally, the healthier and younger you are, the lower your premium will be. Typically, adult women are cheaper to insure as well since they tend to have longer life expectancy than adult men according to the Centers for Disease Control (CDC). You may want to get life insurance quotes from several carriers and make sure you are comparing the same products, but keep in mind that life insurance prices don’t vary as much as home or car insurance rates.
When it comes to life insurance, the average cost is not an easy metric to track. Life insurance companies do not report premium data (other than the total amount of premium they write in a year), which may be to protect the privacy of their policyholders.
The average cost of life insurance from a given company would generally reflect its policyholders’ overall age and health. A life insurance company with higher average premiums could theoretically be insuring older policyholders, policyholders with poor health or a combination of the two. Revealing average life insurance cost data could jeopardize the privacy of a company’s insureds.
What factors determine your life insurance cost?
When considering coverage, people often wonder, “How much is life insurance?” or, “How much is life insurance per month?” The answer is: it depends, and average rates truly aren’t that helpful of a metric when it comes to life insurance because premiums are so personalized. Life insurance providers take many factors into account when determining your eligibility for coverage and your premium. To better understand life insurance costs, thinking of them from the perspective of insurance providers can help you grasp how rates are determined.
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 checks, 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 or your death benefit payout being denied if you pass away during the policy’s contestability period.
Factors that impact 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 do exist and 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 benefit from a cheaper life insurance rate.
- Death benefit amount: Another factor affecting the cost of life insurance is the amount of coverage you need. Higher coverage limits will cost more to purchase, since the life insurance company is agreeing to pay out more upon your death.
- 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. The increased risk of death with these activities will typically cause insurers to charge you more in premiums to compensate. 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, term life insurance 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. 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 the increased risk.
Factors that don’t impact your life insurance rates
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 property 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: While auto and home insurance rates often factor in your credit tier (in most states), your life insurance policy does not.
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.
How much life insurance do I need?
To figure out how much life insurance coverage you need, you should look at your unique circumstances. Specifically, some of the things to think about are your dependents, your lifestyle, your current financial situation and your goals for the future. If you aren’t sure how much coverage you need, working with an insurance agent or using Bankrate’s life insurance calculator may be helpful.
For example, if you have several young children and are the sole income provider for your household, you may need a significant amount of coverage to protect your family in case something happens to you. On the other hand, if you are single and have a healthy savings account, with no outstanding debt, you may require considerably less coverage.