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How much does life insurance cost?
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What To Know First
Life insurance may provide financial assistance to your loved ones after you pass away. But how much does life insurance cost? Using our industry experience, Bankrate’s insurance editorial team created this guide to walk you through the details of how much life insurance may cost for you based on your coverage needs and personal characteristics.
Life insurance costs aren’t straightforward, and pricing life insurance involves several factors, including:
- Policy type
- Death benefit amount
How much is life insurance?
The cost of life insurance depends on several factors, including your age, gender, overall health, the type and length of the policy, and how much coverage you purchase. So, what exactly is the average cost of life insurance? How much you pay for your policy will depend largely 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 longer life expectancy than adult men, according to the Centers for Disease Control (CDC).
You may notice that we don’t have actual life insurance rates on our page, and there is a reason for that. Whether you are looking for the average term life insurance cost, whole life insurance cost or the cost of any other life coverage, average aggregated rates are not available. While some companies might publish average life insurance rates for a specific policy type, those rates are so personalized — with a particular death benefit level, a policyholder of a certain gender and age, and certain health metrics — that they really aren’t useful in helping you determine your own life insurance cost.
Generally, 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 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.
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 processes, insurance companies can determine how much of a risk you present. It’s important to be thorough and forthcoming when you fill out this information. If you misrepresent your health status, you run the risk of your application being denied or your death benefit payout being denied if you pass away during the policy’s contestability period.
Factors that impact your life insurance rates
Life insurance rates are complex. Some of the major rating factors include:
- 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’ll likely 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 policy: 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.
Many people may not consider purchasing life insurance until they are older or have children, but there are many potential advantages to locking in a life insurance rate at a younger age. Carriers typically extend lower premiums to younger applicants as they may be in better health and are expected to pay premiums for many years before they pass away.
Shopping around when you are younger may be especially useful if you’re looking to purchase a permanent life insurance policy. In addition to a death benefit, permanent policies include a savings component that can accrue value over time. The earlier you open your life insurance policy, the lower your premium will likely be and the more time you give the cash value component to grow.
If you're unsure whether you're ready to purchase life insurance, it may be helpful to think about your current financial situation, current and potential future dependents and long-term financial goals. The right time to purchase coverage may depend on your personal circumstances and the type of policy you want. Speaking with a licensed insurance agent may help you determine when to buy coverage based on your unique life insurance needs.
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 history: While auto and home insurance rates often factor in your credit tier (in most states), your life insurance policy does not.
- Homeownership: Your living situation isn’t factored into your life insurance rates. Whether you own, rent or anything else, it’s not a part of how much you pay for life insurance.
- Driving record: Unsafe drivers may have a higher risk of mortality, but life insurance companies do not ask for or use your driving record when rating your policy.
- Marital status: In almost every state, your insurance company can use your marital status as a factor 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 likely 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 may want to look at your unique circumstances. Some of the things you might consider include your financial 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 a helpful next step.
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.
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-exam life insurance policy, your quoted premium may be the premium you’re offered when you opt to buy the coverage.
Insurance is a very personalized product, so you may pay a different premium than your sibling or neighbor for the same coverage. It's worth noting that life insurance quotes work rather differently than home and auto. Home and auto quotes and rates tend to vary more from company to company, while life insurance is generally more stable. You'll likely see very similar quotes for the same coverage types and levels across different carriers.
While it is still considered good practice to compare life insurance quotes, you may want to focus your research efforts more on the types of policies, customer service ratings, financial strength and digital tools a potential provider offers.
How to lower your life insurance rates
Life insurance premiums do not vary as much from provider to provider as auto or home insurance. Many of the factors that determine the cost of life insurance are fairly rigid, like your age, coverage amount and health status. Additionally, carriers are legally not allowed to offer discounts on life insurance. That being said, there may be strategies available to help you save on your premium:
- Maintain a healthy lifestyle: Regular exercise, a balanced diet and scheduling routine check-ups may earn you cheaper life insurance by promoting better health.
- 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.