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How Much is Life Insurance?

November 25, 2020 · 6 minute read

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How Much is Life Insurance?

When a qualifying person purchases a life insurance policy, they pay premiums that can be due monthly—or quarterly, biannually, or annually. (In some cases, a policy owner can get a better cost by paying annually.)

Paying premiums regularly and on time is what keeps an insurance policy active, providing the policy holder with the agreed-upon coverage. But, how much is life insurance going to cost?

Well, individual life insurance premium costs can differ from what someone else is charged— even when the covered amount stays the same. That’s because, in general, a policy’s price is based upon how long the policyholder is expected to live—called their life expectancy.

And, what factors affect how much life insurance might cost? Factors used to calculate life expectancy might include a person’s:

•   age
•   gender
•   smoking status
•   general health history

Overall, the healthier a person is deemed to be, the cheaper the premiums tend to be.

What is the Average Cost of Life Insurance?

So, to arrive at the average cost of life insurance premiums and provide benchmarks, Business Insider contacted four large insurance companies. They asked for quotes for a $250,000 policy with a 30-year term (more about terms later in this post) for people of varying ages and differing genders. Each of these quotes is for people in excellent health.

Twenty-five-year-old females would, on average, receive a monthly life insurance quote of $20.10, while a male of the same age would typically have a premium of $23.05 a month. For 50-year-old females, the life insurance premium would average $60.31, with a male of the same age having an average premium of $81.72 a month.

This survey also collected average life insurance cost for 30-, 35-, 40-, and 45- year-old females and males—with the average life insurance premiums rising incrementally as the ages went up. Both a policyholder’s gender and age can play a role in the cost of life insurance.

What’s more, the average cost of life insurance can vary by state. Overall, the lowest average cost of life insurance for a household is $48, which is in Mississippi. The highest household average by state? $61 in New Jersey.

To provide a sense of how lifestyles can affect life insurance costs, a 45-year-old man who smokes may expect to pay between 100 and 300 percent more than a 20-year-old male who didn’t smoke.

In general, a policy with a 30-year term 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.

Although there is no standard answer to the question of, “How much is life insurance?”, the information listed above may offer some insights. Note that these figures are for term life insurance policies. There’s also universal life insurance, which is more expensive because it has a cash value component to it and covers the policyholder’s whole life (not just a pre-set term).

Term Life Insurance vs. Whole Life Insurance

So, what’s the difference between term and whole life-insurance policies? Here’s a helpful overview:

Term Life Insurance Term

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. When that person dies within the predetermined time frame, then beneficiaries typically receive the payout of the policy.

Premium payments on term life insurance are typically fixed. Once the term expires, then the coverage ends, even if the policyholder is still living. (Some insurance providers may allow policyholders to extend the term of the policy for a cost).

People who purchase term life insurance policies may figure that, by the time the policy ends, they will have enough money in savings. Or they might think that, by the expiration date, beneficiaries listed in the policy will be financially independent. In either case, there may not be a need for coverage for their entire lifetime.

Whole Life Insurance Policies

Whole life insurance works differently. As with term policies, there are also regular premiums that need to be paid—but whole-life premiums can be greater than term life payments. That’s because part of the premium in a whole life policy goes towards a cash value that can be borrowed against.

One other key difference: Whole life insurance doesn’t have an end date, like term insurance, so the policyholder could have this policy for their entire lifetime.

In short, whole life insurance can be in force for a person’s entire life. It often has an investment cash-value component incorporated into it, too. That said, the whole life insurance policyholder does not have the ability to determine how that cash-value will be invested.

Pricing Factors

When seeking out different life insurance quotes, one question that may come up is “what factors affect the cost of life insurance premiums?” Although each individual’s financial goals and health are unique, there are some common applicant factors that life insurance underwriters can evaluate—including the applicant’s:

•   Age and Gender: Life expectancy is a significant factor, younger people in general get lower quotes than older people. Women tend to live longer than men, so females can get a lower premium when all other factors are equal.
•   Health History of the Applicant and Their Family: 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.
•   Smoking Status: Smokers face greater health risks, overall, and this can lead to increased life insurance premiums. When someone takes out a policy as a smoker—and later quits—it can make sense to contact the insurance company to see whether premiums can be lowered.
•   Job Status: Certain occupations can be seen as more risky than others, such as pilots or police officers. This can play a role in the premiums quoted.
•   Hobbies: Certain hobbies carry higher health risks. Compare the risk status of someone who reads as a hobby to someone who skydives—and the reason why life insurance companies may ask about hobbies becomes more apparent.
•   Driving Record: Applicants with a dicey driving record may pay more for a policy than someone with a clean one. Significant red flags, such as a recent DUI, can be especially problematic.
•   Drinking and Drug Use: Although a glass of champagne on New Year’s Eve won’t be likely to grab an underwriter’s attention, applicants that consume more significant amounts of alcohol, or who recreationally use drugs, may see higher premiums.

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.

Speaking broadly, obtaining a life insurance policy when younger and healthier could impact the cost of a policy quote. 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.

Applicants can usually speak to a life insurance agent or customer service representative to learn more about different companies’ policy fine-print.

Choosing a Life Insurance Policy

When determining the amount of life insurance to pursue, there are plenty of approaches out there.

One fairly straightforward approach is the so-called 10x Rule. In this rule, a person takes their annual salary and multiplies it by ten. That sum could indicate one potential life insurance coverage goal.

There’s also the DIME Method (debt, income, mortgage, and education). To use this calculation, add up existing debts, plus the mortgage balance, and children’s future education expenses.

Calculate also the number of years that dependants would need to live off the policy payoff and multiply that by the policyholder’s annual salary. Add all up and that’s an indicator of the policy amount to consider. Also consider childcare expenses and costs of a funeral in calculations.

It’s important to be clear about what is in a life insurance policy. Is it term life (with an ending date) or whole life (typically for a person’s whole life with a cash value component)? When researching a term life insurance policy, it can be helpful to understand when the policy would end. It’s also useful to find answers to questions like:

•   Are monthly premiums fixed or can they increase?
•   If premiums can go up, what triggers that cost increase?
•   Can a life insurance policy that expires be renewed? For how much?
•   Is a medical exam required to qualify or apply?

When applying for a policy, there will usually be questions asked about height, weight, date of birth, smoking habits, and so forth. When a medical exam is required, this may be similar to an annual physical.

The healthcare professional will likely ask questions about medical history (both applicants and their families) and compare these answers to those put on the applications. They may take a blood and urine sample, along with heartbeat and blood pressure measurements.

The life insurance underwriter then reviews the application and results of the medical exam to decide whether to approve or deny the application. They will also determine the premiums offered to approved applicants based on this gathered information.

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.

Learn more about term life insurance through SoFi (powered by Ladder).

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.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.


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