The answer is … it depends.
The average cost of life insurance varies, depending on what type of policy you choose and how much coverage you buy. It also depends on your health and how old you are when you purchase the policy.
You buy life insurance because you want to plan ahead and help ensure your beneficiaries – whether they are your parents, partners or children – have the money they need to cover your funeral costs, pay off your outstanding debts, maintain their standard of living without your income, and achieve dreams like graduating from college.
And if you buy life insurance right now, you’ll save money because you’re younger and healthier. (That isn’t a sales pitch. That’s math.) Here’s what you need to know about the cost of life insurance and how to choose the best affordable life insurance policy for you and your loved ones.
Choosing the right type of life insurance for your budget
There are a lot of different types of life insurance out there, and keeping track of all the different variations can be confusing. That’s why we’ve put together this super-easy chart to help you keep track of your options:
Term life insurance is designed to cover you for a designated period of time, like 30 years. It comes in two common types:
- Medically underwritten term life insurance: A good choice for people who are in generally good health and want to save on premiums
- Simplified issue term life insurance: A good choice for people who don’t want to take a medical exam
Permanent life insurance covers you for the entirety of your life, is much more expensive than term life insurance, and comes with a “cash value” element that can be used to cover premium costs or borrowed against as a policy loan. It comes in two common types:
- Whole life insurance: Permanent life insurance that provides coverage for your entire life
- Universal life insurance: Permanent life insurance in which monthly premiums and insurance coverage may be flexible and customized over time
We’ll take a look at each type of policy in more detail, but when you’re asking yourself “how much does life insurance cost?” keep in mind that in many cases, a cost-effective term life insurance policy will be the best choice for both your personal needs and your budget.
Why? Because the purpose of life insurance is to help ensure your partner and dependents have the income they need to cover living expenses, children’s college costs and to make sure your loved ones have enough money to pay for the funeral and other final expenses. To do that, your policy needs to come with a death benefit that ensures your beneficiaries are taken care of.
But your beneficiaries’ needs will change over time, which is why term life insurance is often the best option. Taking out a term life insurance policy that covers you until retirement age, for example, means that you can protect your family from the loss of your income while you’re still earning that income — but once you’ve begun living off your retirement accounts, your family may no longer need that policy.
Let’s take a closer look at the various types of life insurance and their costs.
What is term life insurance?
Term life insurance comes well-recommended by financial experts because of its affordability. As the name suggests, this type of life insurance covers you for a set period of time (the “term”). Common term lengths are 10, 15, 20 and 30 years.
Typically, this is during the years your family needs it most — until the mortgage is paid off or the kids are no longer financially reliant on you.
Remember, even if you don’t have a partner or kids of your own, you should still consider a term life insurance policy. Becoming an insured person who can provide a death benefit to designated beneficiaries such as parents or siblings means taking the stress off your family and extended family as they deal with your final expenses or unpaid debts, including co-signed student loan debt. (Do you want your parents to get stuck paying off your student loans? They may still be paying off their student loans.)
Term life insurance comes in a couple of different types:
Medically underwritten term life insurance
If you’re decently healthy, medically underwritten term life insurance is often one of the most affordable types of coverage. The premium pricing is personalized to you (hence the term “medically underwritten”). Therefore, it’s based on factors like your age, physical health, gender and lifestyle choices such as smoking.
With Haven Life, you can easily apply online for this type of term life insurance. If approved, you can start coverage that day. In most cases, you’ll need a medical exam to finalize coverage, which can be taken at a time and place that’s convenient for you.
There are some cases where a medical exam will not be needed thanks to advancements in underwriting technology, which is determined based on eligibility and the information in your application. Keep in mind: It’s essential to be honest when completing the application. The issuance of the policy or payment of benefits may depend upon the answers given in the application and their truthfulness. (In other words, if they find out you lied about some aspect of your health, they could kick you off your policy and/or refuse to pay out your beneficiaries.)
Medically underwritten term life insurance is generally affordable, especially the younger you are. Here are some examples of the cost of coverage for nonsmokers in good and excellent health for a Haven Term policy, issued by MassMutual.
|Age||Gender||Health||Face amount||Term length||Monthly premium|
Simplified issue term life insurance
Simplified issue life insurance is a type of term life insurance policy that does not require a medical exam.
The convenience of avoiding a medical exam comes at a cost since there are more risk factors involved. Insurers issue policies without fully knowing how their applicants’ health histories might affect their life expectancy, so they’re assuming more risk — and their life insurance premiums reflect this increased risk.
With simplified issue policies, maximum coverage amounts are usually limited to $500,000 or less. Here are some examples of the cost of coverage for a Haven Term Simplified policy, issued by C.M. Life Insurance Co., a MassMutual subsidiary. Quotes shown are for nonsmokers.
|Age||Gender||Face amount||Term length||Monthly premium|
What is permanent life insurance?
Permanent life insurance is a type of coverage that lasts for the entirety of your life. Instead of paying for coverage for just 20 or 30 years, like you might do with a term life insurance policy, a permanent life insurance policy ensures that you’ll have life insurance coverage until you die, so long as the premiums are paid.
Permanent policies also have cash value that can increase over time. Here’s how this works: In a term life insurance policy, your premium payments go towards the death benefit your beneficiaries receive if you die before the term is up. In a permanent life insurance policy, part of your premium payments go towards the death benefit and the rest of the money helps build “cash value.” This money can be left to accumulate, withdrawn, borrowed against and used to pay future premiums. However, when you die, your beneficiaries receive the death benefit, not the cash value.
Because of the lifelong coverage and cash value component, a permanent policy costs much more than term life insurance. On the flip side, a permanent policy might be a good option for those who want life insurance to be part of their long-term financial strategies.
Whole life insurance
Whole life insurance is substantially more expensive than term life insurance, with one estimate finding that whole life insurance is 6 to 10 times more costly than term life insurance.
If your family is younger or cost-conscious, permanent life insurance may not be as attractive as a term life insurance policy, where the average cost is significantly less expensive.
Estimates for whole life insurance:
- $250,000 policy for a 35-year-old woman in excellent health: $ 246.87 per month from State Farm Insurance
- $500,000 policy for a 35-year-old man in excellent health: $561.59 per month from State Farm Insurance
(Source: State Farm Insurance)
Universal life insurance
Universal life insurance is similar to whole life insurance (that is, it lasts for your lifetime and has a cash value), but with a twist. Universal life insurance offers flexibility throughout your life with respect to your premium payments and death benefit, so long as your premiums and/or cash value are sufficient to cover the cost for the policy’s coverage.
This means that as you age and your needs change, you may choose to change how much you pay in premiums or the amount of coverage you have. For example, you may opt for lower premiums earlier in the policy while your income is still growing and then opt for a lower face value later in life, when you have fewer financial obligations to cover.
Universal life insurance has numerous other “customizable” options, making it a more complex product that often requires the assistance of a financial professional to manage.
Estimates for universal life insurance:
- $250,000 policy for a 35-year-old woman in excellent health: $95.93 per month from Prudential Life Insurance Company
- $500,000 policy for a 35-year-old man in excellent health: $220.90 per month from Prudential Life Insurance Company
Factors that affect the cost of life insurance
If you’ve been paying attention to those estimates we just listed, you probably noticed that there’s no single answer to the question “how much does life insurance cost?” There are literally dozens of potential answers. Your life insurance rates will be determined by several unique factors, starting with the two big ones:
- Whether you want term life insurance or permanent life insurance
- How much of a death benefit you’d like your beneficiaries to receive
Here are a few more factors that go into the cost of your annual premium:
- Gender (women usually have lower premium prices than men)
- Health history
- Family health history
- Lifestyle choices like smoking, drug use and even multiple motor vehicle infractions (which means that being a responsible driver could save both your life and your life insurance costs)
You won’t be able to cut your life insurance rates by getting younger, but there are a few ways you can save money on your life insurance policy — and many of them are relatively easy to implement.
How to save on life insurance
Choose the type of coverage you need
The type of life insurance you purchase has a significant impact on the amount you pay for coverage. Simplified issue life insurance may come with the convenience of 100% no medical exam, but that convenience comes at a price. Whole life lasts for your entire life and has a cash value feature, but can be too costly for cash-strapped individuals. Medically underwritten term life insurance offers affordable pricing, but only lasts for a certain number of years.
Buy the right amount of coverage
Don’t pick a coverage amount at random. The more coverage you need, the more you’ll pay for your life insurance policy — so be thoughtful about your coverage choices. If you really only need $500,000 to adequately cover your mortgage, for example, there is no reason to increase your monthly premium by selecting a $1 million policy; if it’s a 30-year mortgage, taking out 50 years worth of life insurance coverage might not make financial sense. A life insurance calculator can help you determine the right amount of coverage for your financial situation.
Don’t put off buying a policy
If you get your policy while you’re younger (and healthier), you may have the advantage of a lower premium. This is one of the easiest ways to save money on life insurance.
Live a healthy lifestyle
A non-smoker will enjoy significantly lower premiums than a smoker — so quitting smoking will be good for both your health and your wallet. (Most insurers require at least one to two years smoke-free before you will be classified as a non-smoker for underwriting purposes.) Making healthy choices can also help lower your BMI, blood pressure and cholesterol — all of which will be taken into consideration when you buy medically underwritten term and permanent life insurance policies.
Why life insurance is worth it
“Buying life insurance” can sometimes feel like one of those to-dos on par with “renovating the kitchen” or “fixing the roof.” It’s something you know needs to be done eventually, but the time and expense involved may make you feel like there’s never a “right” time to do it.
The cost of a life insurance policy will vary depending on the type of policy you choose and your personal circumstances, but what remains consistent is that coverage helps financially protect your loved ones. If you have someone who financially depends on you, paying for the peace of mind that comes with such protection is worth it.What Haven Life customers are saying: