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. Life insurance costs vary based on several factors, including your age and gender, the company you choose, the death benefit amount you purchase, the type of policy you buy and your health.

There are several types of life insurance, and each type has benefits and drawbacks. The most common is term life insurance, which lasts for a set period, usually 10 to 30 years. Another option is whole life insurance. Unlike term life insurance, which has a policy expiration date for coverage, whole life insurance is permanent as long as you pay your premium and meet any other conditions. Universal life is another permanent life insurance option. It is similar to whole life but adds a layer of flexibility. Because each policy type covers you differently, the cost varies. Bankrate can help you understand the average cost for life insurance, so you can decide if a policy is right for you.

How much is life insurance?

Your life insurance cost will depend 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, women are cheaper to insure as well since they have longer life expectancy than men. Rates vary between companies, so getting life insurance quotes from several carriers could help you find a lower rate.

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 their policyholders’ privacy. The average cost of life insurance from a given company would reflect its policyholders’ overall age and health. A company with higher average premiums could theoretically be insuring either older policyholders, policyholders with poor health or a combination. Therefore, revealing average cost data could jeopardize the privacy of a company’s clients.

Factors that determine your life insurance cost

Life insurance providers take many factors into account when determining your eligibility for coverage and your premium. To better understand these costs, thinking of them from the perspective of insurance providers and how rates are based on risk can be helpful.

It’s best to be completely honest when getting a life insurance quote because insurance companies are pretty savvy at determining things like whether you drink or smoke or regularly engage in risky activities. If you lie and manage to get a policy at a cheaper rate, you run the risk of your policy being canceled or your death benefit not being paid if the insurance company finds out.

Gender

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

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. Because of this increased risk, premiums generally go up as you age. This is why many financial experts recommend that you buy life insurance when you are young, so you can potentially benefit from lower premiums. If you buy a permanent life policy at a young age, you’ll likely enjoy lower monthly costs for your entire life. The premium on term policies stays the same throughout the term, but if you want to renew your coverage, you’ll likely see an increase based on your new age.

Death benefit amount

Another factor affecting the cost of life insurance is how much coverage you need. If you want a policy that provides financial assistance for your funeral expenses and only seek $50,000 in coverage, you will likely 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 generally cheaper than permanent life insurance rates. Term life insurance is only effective for a set period. Permanent life insurance, including whole life and universal life, only ends when you choose to cancel or stop paying the premiums. Because permanent policies are designed to stay in place until you pass away (unless you cancel the coverage or it lapses), there is a far greater likelihood that an insurance company will pay out the death benefit than with a term policy. Permanent life policy rates are typically higher to compensate for the increased risk.

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 construction, war reporting or law enforcement, you could face more risks daily than an office worker. Because of this added risk, you might pay a little more for life insurance.

Health

Your health plays a huge role in how much you pay for life insurance coverage. If you use tobacco products, that will typically raise your premium significantly. Additionally, most life insurance policy types will require that you undergo either a health questionnaire or a health check-up before approving you for a policy. Guaranteed-issue policies do exist and can be an option for customers with more severe health problems.

Suppose you choose a policy that requires a medical exam. In that case, a company-approved nurse may 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. In some cases, the nurse may even take a blood sample. You may also have the option to do a medical assessment at a doctor’s office.

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 cause insurers to charge you more to compensate.

Frequently asked questions

How much should you spend on life insurance?

How much you should spend on life insurance depends on you and your household’s specific financial needs. Finding out how much money your beneficiaries would need in the event of your passing is often the first step to determining your coverage needs. 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 income 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, which would constitute interest, would then be taxable income to you. Depending on the size of the estate and the state you live in, it’s possible that estate taxes would also be owed.

How do I buy life insurance?

In most cases, you can start the process by going through a few carriers’ websites to receive life insurance quotes. If the company you are looking at doesn’t offer online quoting, you may need to call or visit a local agency. Some carriers allow you to buy a policy online while others may require you to see an in-person agent to finish the process. You may have to fill out a medical questionnaire that allows the company to learn more about your health and your family’s health history, and you may need a medical exam to review your current health. You might be able to get same-day life insurance coverage with some types of policies, but you’ll typically want to give yourself several weeks to get through the underwriting process. 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
Cate Deventer
Insurance Writer & Editor
Cate Deventer is a writer, editor and insurance professional with over a decade of experience in the insurance industry as a licensed insurance agent.
Edited by
Insurance Editor
Reviewed by
Senior wealth manager, LourdMurray