Buying life insurance is a big decision — one that is often a long-term commitment — so you are probably wondering how much it will cost. You want to know your family will be financially stable when you are no longer around, but you may be concerned that the premiums will take a big bite out of your budget. The truth is, there is no one single number for a life insurance premium.
The price varies based on an array of factors, including the kind of policy you buy, the amount of coverage you want, your age, your health, and other attributes, as well as which provider you select. Even if you have a twin, you and your sibling may well be quoted different prices. Life insurance policies are that personalized.
But that doesn’t mean you can’t get a good ballpark! Let us help you get a handle on the range of possible prices.
Average Cost of Life Insurance
To get started, let’s do a quick overview before we get to the dollars and cents. Though rates will vary, some of the key criteria used in calculations include:
• Age. Generally, the younger you are when you sign up for life insurance, the cheaper it will be. The older you are, the shorter your life expectancy is, meaning your insurer is more likely to have to pay your beneficiaries upon your death (sorry! We don’t like saying it either, but that’s the bottom line of life insurance).
• Gender. Women tend to have longer life expectancies, so females almost always have lower premiums than males even if their age and health status is the same. The latest CDC figures put the average life expectancy for men at 75.1 years and women at 80.5 years.
• Smoking status. While the rate of cigarette smoking among U.S. adults is declining, there’s no denying it’s a health risk. In fact, it’s the leading cause of preventable disease, disability, and death in America, according to the CDC. Approximately 480,000 deaths (that’s one out of every five deaths) is attributable to the habit.
• General health history. Overall, the healthier a person is deemed to be, the cheaper the premiums tend to be. This means factors like your height and weight, blood pressure, cholesterol levels, and pre-existing conditions will be considered.
How much you’ll pay also depends on whether you get term or permanent life insurance. As the name implies, term life insurance covers you for a discrete period of time, and then you are no longer insured. This kind of policy can work well for those who want to know their loved ones are financially secure as a mortgage is paid off or a child pays college tuition. On the other hand, permanent life insurance guarantees that whenever you may die, your designated beneficiaries will receive a lump-sum payment. Permanent life insurance policies also act as a savings vehicle; more on that in a moment.
Okay, here are some numbers to ponder. These rates are based on the healthiest category of applicants (or “super preferred” in insurance-speak) taking out a $500,000 policy. In the case of the term policies, the length is 20 years.
|Age||Female, Term Insurance per year||Male, Term Insurance per year||Female, Permanent Insurance per year||Male, Permanent Insurance per year|
A word about those life-insurance premiums: They are typically paid monthly, though you may be able to save if you pay annually, up front. It’s important to keep up with your life insurance payments so your policy doesn’t lapse and you and your loved ones enjoy that halo of protection you are paying for.
Average Cost of Term Life Insurance by Age
Term life insurance tends to be the more affordable option. Permanent life insurance can cost considerably more – from five to 15 times as much. However, the costs will vary based on many factors. One obvious one is that a longer policy will have higher premiums than one with a shorter term. Why? Because it’s more likely that the insurance company will need to pay out on a longer one.
When Business Insider recently gathered rates, they found that a 35-year old nonsmoker in California could take out a 30-year term policy with a benefit of $250,000 for in the range of $20 to $28 per month for females. For males, the rates ranged from $23 to $30 per month.
By age, the average rates for women climbed from $22.95 per month at age 35 to $29.63 at age 40, $41.75 at age 45, and $60.68 at age 50. For men, the average costs were $25.72 per month at age 35, $34.74 at age 40, $51.42 at age 45, and $81.23 at age 50.
As you see, you’ll get much better rates, the younger you sign up.
Average Cost of Whole Life Insurance by Age
Now, let’s take a look at permanent life insurance, which will pay a death benefit even if you live to be over 100 (hey, it happens more often than you might think!). One kind of permanent life insurance is whole life. It also accrues “cash value,” which can be a source of funding for future needs. Providers may offer a guaranteed interest rate or unguaranteed dividends, depending on the particular policy you purchase.
Now, let’s look at how much this kind of life-insurance policy can cost. For healthy (what’s known as “preferred” status) non-smokers in New Jersey, recent monthly premiums for a $500,000 policy averaged $433 for a 35-year-old female and $517 for a male; $523 for a 40-year-old woman and $652 for a man; $653 for a 45-year-old female and $827 for a male; and $837 for a 50-year-old woman and $1,057 for a man.
Average Cost of Life Insurance Without a Medical Exam
Usually, part of the application process for life insurance involves a medical exam. A medical history is taken, and then there’s a brief visit to a healthcare practitioner (or they may come to you). Your height, weight, pulse, and blood pressure are typically recorded; blood and urine samples may be collected, too. The results allow the life insurance company to gauge your health and contribute to the calculation of the premium you will pay.
Some people, however, don’t want to invest the time in this step; signing up can take 4-8 weeks. Or perhaps they just don’t like medical appointments and blood draws. Others may worry about what will turn up in their testing and worry that they won’t qualify for coverage. Regardless of the reason, there are insurance policies that let you sidestep the medical exam. These are referred to as no-exam policies.
Typically, these types of policies offer lower coverage limits than those that do include medical testing. For instance, they might offer from $5,000 to $100,000 in coverage. To acquaint you with how much this could cost, let’s review some prices:
• For a woman in her mid-thirties, it would be $17.58 per month for $50,000 in coverage and $32.69 for $100,000. This is based on Globe Life policies.
• For a man in his mid-thirties, the cost would be $24.12 per month for $50,000 coverage from Colonial Penn.
If you are interested in this type of policy, it is also sometimes called simplified-issue insurance or guaranteed-issue insurance.
Perhaps the idea of no-exam-needed policies appeals to you, but you want greater coverage? If so, some insurers do offer higher benefits. For instance, providers like Brighthouse and Lincoln offer $500,000 no-exam policies. For 20-year term life insurance, a woman age 35 would pay $22.55 per month and men would pay $29.28. At age 40, the rates would rise to $30.15 for females and $37.60 for males; at age 45, $43.47 for women and $52.39 for men. By age 50, signing up would cost females $70.45 and males $76.80 per month.
Average Cost of Term Life Insurance by Health
Here’s another angle on life insurance: looking at how much it will cost you based on your health. As we mentioned above, the insurance industry uses different terms to describe how healthy a policyholder is. These terms are:
• Super preferred (or preferred plus): This is the healthiest category to be in; you’re likely to live a long life, and you will get the best rates. Typically, to qualify, one needs no family history of death from cancer or heart disease before age 60 or 65; no tobacco use in recent years, nor a history of substance abuse; healthy blood pressure and cholesterol levels; no personal history of cancer or heart disease; a clean driving record; and your height and weight must fall in a certain range.
• Preferred: This category is typically a bit more liberal in terms of the height/weight limits, cholesterol numbers (perhaps a total limit of 240), and when one might have last used tobacco. This category also encompasses those who have had a close relative die of cancer or heart disease before the age of 60. Rates will be higher than those in the super preferred category.
• Standard: This is the next category and tends to include those with a history of substance abuse as well as those who use tobacco.
So, now you are probably curious how rates stack up based on these categories. Let’s take a look at costs for $500,000 coverage of 20-year term life insurance:
• For a woman who is age 30, the annual premium for standard health could be $348, with preferred costing $229, and super preferred at $189. At age 40, the annual costs would be approximately $514, $352, and $285 in the same categories.
• For a man who is age 30, the annual premium for standard health could be $421 for standard, $292 for preferred, and $225 for super preferred. At age 40, the premiums would be $660, $423, and $336 in those categories.
Average Cost of Life Insurance by Term Length
As you think about buying life insurance, you may be pondering different versions of term insurance. Perhaps you just took out a 30-year mortgage and want to be sure those payments will be covered if a worst-case scenario happened and you weren’t around to write checks. Or maybe you are about to marry someone with a 10-year-old, and you want to be sure the child’s college expenses will be covered, no matter what may happen.
Term insurance can be the perfect vehicle in situations like these. Term life insurance has a straightforward goal: to provide the policyholder with a certain amount of coverage during a designated time period — perhaps 15, 20, or 30 years. If a person dies within the time frame, then beneficiaries typically receive the payout of the policy.
As you might expect, the longer the term, the higher the premium. You’re buying into more coverage, so that will cost more. Let’s see how some numbers stack up.
For a 35-year-old man with a preferred health rating, here’s how much a monthly premium would be:
• 10 years of coverage: $20.19 for $500,000 in coverage; $27.42 for $750,000 in coverage; $30.33 for $1,000,000, and $54.42 for $2,000,000
• 20 years of coverage: $28.97; $40.55; $50.44; and $94.35 for the same limits as above.
• 30 years of coverage: $44.53; $63.89; $81.10; and $155.83 for the same limits as above.
As you see, getting twice as much coverage in terms of the benefit doesn’t double your payments, nor does extending your coverage term from 10 to 20 years mean you will pay twice as much. All this is good news in the affordability department!
What Factors Determine the Cost of Life Insurance?
When researching different life insurance quotes, you may wonder why rates vary as you price different policies. Let us break down for you some of the most important factors that influence to cost of a policies:
• The kind of insurance: As we have mentioned above, there are two main kinds of life insurance, term (coverage for a specific period of time) and permanent (life-long coverage). Permanent is pricier.
• The amount of coverage: If you buy $250,000 of coverage, it will of course cost less than a policy that pays a death benefit of, say, $2 million.
• Length of a term policy: If you are shopping for a term policy, expect to pay more for a longer period of coverage. If you buy a 20-year policy, for instance, it will be higher in price than a 10-year policy, with one estimate saying the increase would be a 40% higher premium.
• Age and gender: Younger people in general get lower quotes than older people because it is less likely that the insurer will need to pay out in the near future. Women tend to live longer than men, so females can get a lower premium when all other factors are equal.
• Health status: At a minimum, the insurance application will ask health-related questions. Many life insurance companies also require a medical exam, along with the ability to review health records before a policy can be issued. Certain health conditions, such as cancer and heart disease, can increase premiums. Weight, blood pressure, and cholesterol levels can also play a role. Plus, even if the applicant is healthy, a family history of health issues can impact premium pricing or policy eligibility.
• Lifestyle: Do you have a high-risk job (say, a pilot or police officer) or hobby (skydiving would be a classic example)? Or do you smoke, which carries health implications? Do you have a history of substance abuse or a recent DUI on your record? These factors can raise your insurance rates.
It’s notable that life insurance companies can have different underwriting policies — so questions asked during the application process may vary from provider to provider.
One key point to keep in mind: Obtaining a life insurance policy when younger and healthier could impact the cost of a policy quote in a very good way. With some life insurance companies, the consumer can lock in a set monthly premium upon signing up — in which case the life insurance premiums would remain stable throughout the entire term of policy.
What Factors Don’t Impact Your Life Insurance Rates?
So, that’s quite a list of things that do impact the cost of life insurance. Now, let’s look at what doesn’t influence the price tag:
• Ethnicity, race, and sexual orientation. Insurers can’t discriminate based on these factors.
• Credit score. Yes, your insurer may look at how you rate over the last seven years, but whether you are a 500 or a 700 shouldn’t make a difference. That said, if you have a bankruptcy on your record, that could influence your perceived risk and may affect premiums.
• Marital status. This doesn’t raise or lower your rates (though, yes, it does matter to car insurance quotes).
• How many beneficiaries you have. It won’t impact your rate if you name one person or several.
When Is the Best Time to Buy Life Insurance?
It’s typically a good idea to buy life insurance as soon as you feel you need it. As we’ve discussed, rates are lowest when you are younger, before health issues typically crop up.
In terms of timing it right, many people buy a policy when they know they will have dependents who’ll rely on their earnings. For instance, getting engaged to be married is a good time to consider purchasing a life insurance policy. You would want to know your spouse is taken care of financially if anything were to happen to you.
Similarly, if you are expecting a child, that is another classic trigger moment for buying a life insurance policy. Knowing that you have protection for your kids, from birth through college, can let you rest a lot easier.
There’s another angle to consider: The half-birthday aspect of insurance premiums. If you apply for life insurance six months or more past a birthday, your insurer will likely round up to the next birthday. This can wind up locking you into a higher rate for the entirety of your policy. So look at the calendar before you commit to a purchase, and check in with your insurer if there’s a way to back-date your policy if you are past your half-birthday.
How to Choose the Best Policy for You
Armed with all of this intel, you’re ready to go shopping. Here are some considerations as you get acquainted with your options, whether you work with an agent or use the easy, one-click options online.
• You’ll need to decide whether term life insurance or permanent coverage best suits your needs and budget.
• You’ll want to determine the amount of coverage to buy. Some people say to multiply your annual salary by 10; others use the DIME method. There’s also the DIME Method to calculate the amount of debt, lost income, mortgage payments, and educational expenses that would need to be covered if you weren’t here to pay them. (This could leave you overinsured, so you could subtract your assets from the figure you calculate.)
• You’ll want to check rates from different, well-rated insurance companies to see where you’ll get the most enticing quote. You can look into the details and evaluate whether the premiums are fixed or if they will increase (if the latter, why and by how much?). You can also decide if you want a policy that requires or waives a medical exam, and consider whether a term policy offers renewal options and how costly they would be.
These factors will help you find a policy that says, “Yup, I’m The One!”
As you have seen, there’s a galaxy of options when it comes to buying life insurance. Not only are there different kinds of insurance (term versus permanent, and many permutations), but there are also a range of rates to suit many budgets. Factors that can impact rates include how much coverage you want, for how long, your age, your health, and other attributes.
Only you can know what policy will be the perfect, personalized fit for you, but do make sure you seriously consider investing in a policy as soon as possible. This kind of protection is a key element of your financial life, and helps give you peace of mind, no matter how uncertain the times.
Life Insurance Made Easy with SoFi (powered by Ladder)
SoFi and Ladder have collaborated to make affordable term life insurance quotes quick and easy to get. Competitive policy rates can be provided in a few clicks on a wide range of amounts — from $100,000 to $8 million.
SoFi Protect term life insurance policies are fee-free, including no commission fees. If a policyholder wants to adjust the coverage amount (and, therefore, the premiums), it’s simple to change coverage.
These term life insurance policies have fixed payments, guaranteed not to increase throughout the life insurance term. In addition, qualifying applicants don’t need to take a medical exam.
Ladder policies are issued in New York by Allianz Life Insurance Company of New York, New York, NY (Policy form # MN-26) and in all other states and DC by Allianz Life Insurance Company of North America, Minneapolis, MN (Policy form # ICC20P-AZ100 and # P-AZ100). Only Allianz Life Insurance Company of New York is authorized to offer life insurance in the state of New York. Coverage and pricing is subject to eligibility and underwriting criteria. SoFi Agency and its affiliates do not guarantee the services of any insurance company. The California license number for SoFi Agency is 0L13077 and for Ladder is OK22568. Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other. Social Finance, Inc. (SoFi) and Social Finance Life Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under LadderLifeTM policies. SoFi is compensated by Ladder for each issued term life policy. SoFi offers customers the opportunity to reach Ladder Insurance Services, LLC to obtain information about estate planning documents such as wills. Social Finance, Inc. (“SoFi”) will be paid a marketing fee by Ladder when customers make a purchase through this link. All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.