How much does life insurance cost?

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Life insurance can provide financial assistance to your loved ones after you pass. This assistance can extend to paying for final expenses and also compensating the beneficiaries for a loss of income due to the death of the breadwinner.

There are several types of life insurance. The most common is term life insurance. With this, you pay a fixed premium (monthly or annually) for a specific amount of coverage, such as $500,000. But the coverage only lasts for a specific period of time and then expires. The coverage period can be as short as 10 years or as long as 30 years.

Another option is whole life insurance. Unlike term life insurance that has a policy expiration date for coverage, whole life insurance is permanent. This means that as long as you continue to make your premium payments on time you have coverage for your entire life. Whole life insurance is much more expensive than term life insurance in most cases. When you shop for life insurance or switch companies, costs will play a large role in determining which provider and plan you use.

How much is life insurance?

As part of incorporating it into your financial strategy, you may want to know “how much does life insurance cost?” The following numbers are supplied by S&P Global Market Intelligence and demonstrate an example of term life insurance prices from four major life insurers for healthy, non-smoking policy holders.

Average cost of life insurance by age

S&P Global Market Intelligence also provides rates by age for healthy, male and female policy shoppers seeking $250,000 of term life coverage at various ages:

Age Average female quote Average male quote
25 $18.59/month $22.67/month
30 $19.79/month $23.49/month
35 $22.95/month $25.72/month
40 $29.63/month $34.74/month
45 $41.75/month $51.42/month
50 $60.68/month $81.23/month

It is important to note that the life insurance cost increases most significantly after age 45. Those who wait until they reach middle or retirement age to purchase coverage will typically pay much more for it than if they had taken out a policy when they were younger.

Average cost of life insurance by gender

To see the differences highlighted by gender, both of the following policyholders are 35 years old and are seeking a 30-year term policy with a death benefit of $250,000.

Life insurance company Average cost of life insurance for 35-year-old female Average cost of life insurance for 35-year-old male
RiverSource $22.09/month $24.72/month
State Farm $28.07/month $30.02/month
Nationwide $20.34/month $23.63/month
Mutual of Omaha $21.29/month $24.51/month
Average cost $22.95/month $25.72/month

As you can see, the average life insurance cost for a man is about $2.80 more per month than a woman will pay. This adds up to a little over $1,000 over the life of a 30-year term policy. Rates are similar, regardless of the size of the insurance company.

Life insurance rates by state

As with other types of insurance, variables unique to you can affect the cost of your life insurance. However, the life insurance cost is not affected by geographic factors, such as the neighborhood you live in. Life insurance can slightly differ on average within the U.S. While regulations may vary by state, average rates in each state may just reflect slight variances in provider rates or policy coverage amounts.

Average cost of term life insurance by state

S&P Global Market Intelligence published a table showing the average cost of term life insurance per household for every state in the U.S., broken down as follows:

State Annual life insurance premium Average monthly premium
Alabama $602 $50
Alaska $655 $55
Arizona $615 $51
Arkansas $584 $49
California $668 $56
Colorado $645 $54
Connecticut $724 $60
Delaware $657 $55
District of Columbia $636 $53
Florida $627 $52
Georgia $630 $53
Hawaii $687 $57
Idaho $597 $50
Illinois $631 $53
Indiana $593 $49
Iowa $601 $50
Kansas $601 $50
Kentucky $599 $50
Louisiana $597 $50
Maine $641 $53
Maryland $712 $59
Massachusetts $718 $60
Michigan $610 $51
Minnesota $639 $53
Mississippi $581 $48
Missouri $590 $49
Montana $601 $50
Nebraska $603 $50
Nevada $607 $51
New Hampshire $708 $59
New Jersey $732 $61
New Mexico $588 $49
New York $675 $56
North Carolina $617 $51
North Dakota $603 $50
Ohio $599 $50
Oklahoma $598 $50
Oregon $627 $52
Pennsylvania $658 $55
Rhode Island $660 $55
South Carolina $615 $51
South Dakota $591 $49
Tennessee $609 $51
Texas $633 $53
Utah $636 $53
Vermont $655 $55
Virginia $682 $57
Washington $655 $55
West Virginia $590 $49
Wisconsin $607 $51
Wyoming $601 $50

Factors that determine your life insurance costs

There are many factors life insurance providers examine when determining your eligibility for coverage and your premium price. To better understand these costs, it can help to think of them from the perspective of insurance providers and how rates are based on risk.

Gender

Women have a longer life expectancy than men on average, so if you are a male, you represent a higher risk to the insurance companies. Based on this, life insurance costs are typically more expensive for a male than a female of the same age.

Age

The older you are when you request a policy, the more likely it is that the insurance company will have to pay the benefit.

Amount of death benefit

Another factor affecting the cost of life insurance is how much coverage you need. If you want a policy that provides financial assistance to a loved one (think $50,000), you will pay far less for this than you would for a policy that provides a $1,000,000 benefit upon passing away.

Type of life insurance

Term life insurance rates are cheaper than whole life insurance rates. Term life insurance is only effective for a set period of time. Whole life insurance is permanent and only ends when you choose to cancel or stop paying the premiums. Term life insurance leaves a death benefit amount of your choice. Whole life insurance also includes a cash value amount you contribute to that can be accessed while you’re alive.

Job

What you do for a living can also have an impact on how much you pay for life insurance. If you are in a dangerous profession such as construction, war reporting or law enforcement, you could face more risks on a daily basis than an office worker. Because of this added risk, you might pay a little more for life insurance.

Health

Your health also plays a huge factor in how much you pay. If you use tobacco products, that will typically raise your premium significantly. Furthermore, most life insurance companies will want you to undergo either a health questionnaire or a health check-up before approving you for a policy.

A company-approved nurse will visit your home, gather information about your and your family’s health history and check health metrics like your blood pressure and resting pulse rate, or in some cases, even take a blood sample. Your current health and your family’s risk factors will at least partly determine how much you will pay.

Lifestyle

Last but not least is how you live your life. If you drink alcohol regularly or participate in high-risk activities such as cliff diving, you will likely pay more for life insurance.

Frequently asked questions

How much should you spend on life insurance?

This depends on you and your household’s specific financial needs. It is ideal to find out how much coverage you will need to provide for your beneficiaries in the event of your passing. This may include final expenses, costs associated with making up your income for your family, your children’s educational expenses and your debts. Once you have a firm estimate on how much you want to leave to your family, you can shop around to find the best rates.

Do you pay taxes on life insurance?

This depends on your particular life insurance policy. In general, you do not have to pay taxes on a life insurance death benefit. If you own a cash value policy, then the cash value also grows on a tax-deferred basis and any loan you take from this amount is tax-free as well. The only time that you will pay any income tax on a cash value life insurance policy is if you cash out the policy completely and end up with more money than you paid in over the life of the policy. The difference would then be taxable income to you.

How do I buy life insurance?

In all cases, you can start the process by going through a few carriers’ websites to receive life insurance quotes. Some allow you to buy a policy online while others will want you to fill out a medical questionnaire that allows them to learn more about your health and your family’s health history. Moreover, some will also want to do a check-up to determine how healthy you are now. Therefore, with some, you can buy a policy right away while with other companies, it might take weeks before you receive coverage. Additionally, many people also have access to free or discounted life insurance through their employer’s group plan, so you may want to speak to your HR representative if this is an option that would benefit you.

Written by
Cynthia Paez Bowman
Personal Finance Contributor
Cynthia Paez Bowman is a finance and business journalist who has been featured in Bankrate, Business Jet Traveler, MSN, CheatSheet.com, Freshome.com and TheSimpleDollar.com. She regularly travels to Africa and the Middle East to consult with women’s NGOs about small business development and works with select startups and women-owned businesses to provide growth and visibility.
Edited by
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