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How much does life insurance cost?
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What To Know First
Opting for life insurance is a pivotal decision, one that helps provide a safety net for those we hold dear. It’s an important purchase and not one to take lightly, so how much does ensuring this peace of mind actually cost? At Bankrate, our insurance editorial team, armed with extensive industry knowledge, has tailored this guide to help you better understand life insurance costs.
Here, you’ll learn how life insurance pricing works and how rates are impacted by individual factors, from age and health to the type and scope of coverage.
On This Page
- How much does life insurance cost?
- What factors impact your life insurance cost?
- What doesn’t impact your life insurance premium?
- How much life insurance do I need?
- How do I get a life insurance quote?
- Differences between term and permanent life insurance
- How to lower your life insurance rates
- Frequently asked questions
How much does life insurance cost?
The cost of life insurance depends on 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 deliberate reason behind this. Life insurance, encompassing term, whole or other types, 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.
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.
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Whole life insurance combines life insurance with an investment component.
- Coverage for life
- Tax-deferred savings benefit if premiums are paid
- 3 variations of permanent insurance: whole life, universal life and variable life include investment component
Term life insurance is precisely what the name implies: an insurance policy that is good for a specific term of time.
- Fixed premium over term
- No savings benefits
- Outliving policy or policy cancellation results in no money back
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This advertising widget is powered by HomeInsurance.com, a licensed insurance producer (NPN: 8781838) and a corporate affiliate of Bankrate. HomeInsurance.com LLC services are only available in states where it is licensed and insurance coverage through HomeInsurance.com may not be available in all states. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions (such as approval for coverage, premiums, commissions and fees) and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way.
What factors impact your life insurance cost?
When considering coverage, you might wonder how much life insurance is per month. There is no one answer (or even a range of answers), as the cost can vary widely. 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.
Bankrate's take: When to shop for life insurance
Not everyone needs life insurance, but if you do, applying as soon as you have a need can help you secure the best rate. Life insurance premiums are typically lower for younger applicants, as age is a significant factor in determining rates. Younger individuals are often in better health and the odds of them dying sooner than later are low, which results in lower overall monthly costs.
Shopping for life insurance early can be particularly beneficial if you’re considering a permanent policy. These policies not only provide a death benefit but also include a cash value component that can grow over time. By purchasing a policy at a younger age, you can often lock in lower premiums and give the cash value more time to accumulate.
When deciding if it’s the right time to purchase life insurance, consider your current financial situation, potential future dependents and long-term financial goals. The timing for purchasing coverage will depend on your personal circumstances and the type of policy you need. Consulting with an experienced licensed insurance agent can help you make an informed decision based on your unique life insurance requirements.
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 64 percent of all life insurance in force, with average policy sizes increasing from $163,000 in 2012 to $197,000 in 2022. 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.
How do I get a life insurance quote?
To find out how much you’ll pay for life insurance, start by figuring out how much coverage you need and what type of policy is best for you. You can do independent research for this, or you can work with a licensed life insurance agent. Once you’ve chosen your coverage amount and policy type, you can get a life insurance quote.
For most policies, a quote is just a preliminary estimate of your premium. Quotes can change, especially after you’ve undergone a medical exam and the insurer reviews the results. Not all policy types require a medical exam, though, and if you’re applying for a no-medical-exam life insurance policy, your quoted premium may be the premium you’re offered when you opt to buy the coverage.
Bankrate's take: Reviewing life insurance quotes
Life insurance premiums can vary significantly from carrier to carrier based on individual risk factors such as pre-existing conditions like diabetes, heart disease or high blood pressure. It's a personalized product, so your premium may differ from that of your sibling, friend or neighbor for the same coverage.
While it's still good practice to compare life insurance quotes, focus your research on the types of policies available, customer service ratings, financial strength and the digital tools offered by potential providers. This approach will help you find the best fit for your needs and ensure you select a reliable and supportive insurance company.
Differences between term and permanent life insurance
Life insurance policies fall into two main categories, term and permanent, each with its own benefits and drawbacks. Term policies are active for a pre-set number of years, which is usually somewhere in the 10 to 30-year range. Term policies are a fairly straightforward type of life insurance: you pay a fixed premium in exchange for a death benefit for your named beneficiaries. If you pass away during your policy’s term and have kept up with your regular payments, your beneficiaries receive the death benefit payout.
Because there is a good chance you will outlive your policy, term premiums tend to be affordable for most budgets. Term policies are more advantageous if you only need coverage for a short period of time, like when your children are young or if you are paying off your home loan.
Term life pros:
- Affordability: Term premiums tend to be affordable for most budgets.
- Simplicity: Straightforward coverage without the complexities of variable components such as interest rates, dividends or mortality costs.
- Flexibility: Ideal for covering specific periods, like when children are young or during a mortgage term.
Term life cons:
- Temporary coverage: Coverage ends when the term expires, and you may need to reapply for a new policy or pay higher premiums to renew or convert.
- No cash value: Term policies do not build cash value or provide investment options.
- Increasing costs with age: Renewing or purchasing a new term policy later in life can be more expensive.
Permanent policies, on the other hand, are more complex. As the name implies, they last for an entire lifetime as long as premiums are paid, although it’s important to mention that lifetime in this instance usually means a maximum coverage age of 95-121. In addition to the death benefit, most permanent policies also have a cash value component that acts like a savings vehicle. There are five main types of permanent life insurance policies — whole, universal, variable, variable universal and indexed universal — and each offers different ways to grow the cash value.
Permanent life insurance policies are more customizable, and depending on the policy type you choose, you could leave a larger estate for your family than what is possible with a term policy. Those with lifelong dependents, like a family member with a disability, may like the extra assurance a permanent policy can provide.
Permanent life pros:
- Lifetime coverage: Provides coverage for your entire life (95-121) as long as premiums are paid.
- Cash value: Accumulates cash value that can be borrowed against or withdrawn.
- Estate planning: Can be used to leave a larger estate for your family, particularly useful for lifelong dependents.
Permanent life cons:
- Higher premiums: Permanent policies are typically much more expensive than term policies.
- Complexity: More complex and may require an in-depth understanding of different investment options. Policies can terminate prior to maturity without value in certain circumstances.
- Surrender charges: Withdrawing from the cash value can incur surrender fees and reduce the death benefit.
How to lower your life insurance rates
Your age, coverage amount and health status are some of the most important factors in determining the cost of your life insurance, but that does not mean you are helpless in lowering your rate. While life insurance companies are legally barred from offering policy discounts, the following strategies could help you lock in a more affordable rate:
- Maintain a healthy lifestyle: Regular exercise, a balanced diet and routine medical check-ups may earn you cheaper life insurance by promoting better health. If you’re a smoker, taking steps to quit could also help you get a lower life insurance price.
- Manage medical conditions: Chronic medical conditions, such as heart disease and diabetes, typically increase the price you pay for life insurance. However, if you demonstrate to your insurer that you are being proactive about managing any health conditions, you may see a less severe surcharge.
- Avoid high-risk hobbies: Participating in potentially life-threatening hobbies like skydiving, bungee jumping or scuba diving usually causes your premium to increase.
- Apply for a policy early: Life expectancy in the U.S. currently hovers around 76 years. Applying for a policy while you're still young typically yields the lowest rates, as carriers do not anticipate having to pay out a death benefit for a longer period of time.