How Much Does Life Insurance Cost?
The cost of life insurance is based on your life expectancy. Your age, gender and health all affect how much life insurance will cost for you. Term life insurance is typically cheaper than permanent life insurance, and buying a policy when you’re young can mean significant savings on your premiums.
- Written By Terry Turner
Senior Financial Writer and Financial Wellness Facilitator
Terry Turner is a senior financial writer for Annuity.org. He holds a financial wellness facilitator certificate from the Foundation for Financial Wellness and the National Wellness Institute, and he is an active member of the Association for Financial Counseling & Planning Education (AFCPE®).Read More
- Edited BySavannah Hanson
Senior Financial Editor
Savannah Hanson is an accomplished writer, editor and content marketer. She joined Annuity.org as a financial editor in 2021 and uses her passion for educating readers on complex topics to guide visitors toward the path of financial literacy.Read More
- Financially Reviewed ByStephen Kates, CFP®
Stephen Kates, CFP®
Stephen Kates is a Certified Financial Planner™ and personal finance expert specializing in financial planning and education. Stephen has expertise in wealth management, personal finance, investing and retirement planning.Read More
- Updated: November 18, 2022
- 7 min read time
- This page features 5 Cited Research Articles
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What Factors Determine Your Life Insurance Cost?
Life insurance rates are based on life expectancy. If you are expected to live longer, the insurer sees you as less of a risk — you’ll pay premiums for a longer period and the company can make a bigger return on the money you pay in.
Age and gender play a major role in how much you will pay since both play a major role in how long you’re expected to live, but there are several other factors every insurer considers that will affect how much you pay.
You should take these factors into consideration when buying life insurance.
- Policy Type
- Typically term life is less expensive than permanent life insurance. Term life insurance has a shorter term — or time period it’s in effect. This is usually a specific number of years — 10, 20 or 30, for example. Permanent life insurance — whole and universal life — almost always lasts for your lifetime, and can include an investment or savings feature.
- The older you are, the more you pay for life insurance. Premiums are based, in part, on life expectancy. As you age, your life expectancy goes down — and the risk of insuring you goes up.
- Women have longer life expectancies, so they typically pay lower premiums than men of comparable age and health.
- Chronic or serious health conditions can affect your life expectancy and can result in higher life insurance premiums. You may have to undergo a medical exam to get life insurance in some cases. Insurers typically look at all existing conditions you have along with your height, weight, blood pressure and cholesterol levels.
- Family Medical History
- A family history of cancer, heart disease, diabetes or other medical conditions can increase your risk of developing the same type of condition, which can increase your premiums.
- Occupation and Lifestyle
- If you work at a dangerous or high-risk job — such as a coal miner or firefighter — you’ll likely pay more in life insurance premiums than someone in a low-risk occupation. You will also have to pay more — or may be denied coverage — if you participate in high-risk hobbies or activities such as skydiving or deep-sea diving.
- Tobacco Use
- Tobacco use increases your risk of cancer, heart disease and other illnesses that can shorten your life expectancy. If you smoke or use other tobacco products, you will have to pay more in premiums than a non-smoker.
- Driving Record
- If you have serious traffic violations — especially driving under the influence — on your record, you may have to pay higher premiums.
Factors That Don’t Affect Your Rates
At the same time, there are other factors that do not affect your life insurance rates. In some cases, laws prevent discrimination. In others, a factor may not affect how life insurance works.
- Credit score (in most cases it won’t affect your rate, but a bankruptcy may peg you as a mortality risk)
- Marital status
- Number of beneficiaries you name
- Number of life insurance policies you already have (though you may have to justify them)
- Race, ethnicity or sexual orientation
When choosing a life insurance policy, it pays to shop around and compare companies and policies against one another. If you are unsure how to compare companies and policies, use a licensed insurance agent to help you navigate the process.
How Much Is Term Life Insurance on Average?
Term life insurance covers a specific number of years. If you die within that term, the insurance company pays a death benefit to your beneficiaries. If you outlive the term of the policy, you don’t get any money back.
The average monthly premium rate varies widely by age and sex, according to an analysis by online insurer Quotacy.
|AGE||MONTHLY RATE MAN||MONTHLY RATE WOMAN|
The amount of coverage and health factors can also affect the average rate.
How Much Is Permanent Life Insurance on Average?
Rates for permanent life insurance — whole and universal life — tend to be higher than term life insurance rates. But the coverage does not expire and whole life insurance has a cash value you can borrow against or cash in.
The cost for permanent life insurance is based in part on when the policy is paid up — the point at which you’ve paid enough into the policy to cover your death benefit and any cash value.
Typically, you set up quotes based on paying your premiums on a monthly basis until you’re either 65 or 99. You then pay a monthly premium based on your age at the time of your first premium payment.
These are the average whole life insurance rates payable up to age 99 as of 2022, according to independent insurance broker Policy Genius.
|AGE||MONTHLY RATE MAN||MONTHLY RATE WOMAN|
What You Can Do to Lower Your Life Insurance Rate
The best way to lower your life insurance rate is to buy early in your life. Few things affect your rate as much as waiting.
But there are several steps you can take to lower your rate no matter how old you are when you decide to buy life insurance.
- Avoid Hidden Fees
- Paying monthly rather than yearly premiums can stick you with extra fees. Also, look carefully at riders — add-ons that give you extra coverage for extra cost. Ask about all fees and make sure you are only paying for features that work for your goals and needs.
- Choose Term Life Over Permanent Life Insurance
- Term life is cheaper than permanent life insurance. For most people, term life will also fit most of the requirements they’re looking for in life insurance. Compare the costs and benefits of both types of coverage before buying.
- Get Fit
- Simply losing weight before buying a policy can save you on your rate. Insurance companies use your height and weight to determine your BMI — body mass index, a measure of body fat. Insurers use this as a gauge of your health and how much risk they’re taking by insuring you. Lowering your cholesterol, blood pressure and weight can make you a better risk and save you money. Some insurers will reassess your fitness every few years to recalculate the cost of insurance. If you have significantly improved your health since buying your policy, speak to your insurance company about this option.
- Pay Your Premium with Cash Dividends
- Some investments in permanent life insurance policies pay dividends. If you have a policy that does, you may be able to route your dividends toward continued premiums, cutting your monthly or yearly out-of-pocket cost. Ask about that option when considering a permanent life policy.
- Pay Your Premium with Your Policy’s Cash Value
- If you’ve had a permanent life insurance policy long enough for it to build up cash value — usually decades — you may be able to put the cash value to work paying your premiums. It will lower the amount of your death benefit, but it may be worth it if you’d have trouble keeping up with payments.
- Reassess How Much Life Insurance You Need
- You pay more in premiums for more coverage. Reconsider exactly how much life insurance you actually need. If you can lower the coverage amount, you will lower your monthly or yearly premiums.
- Reassess Your Term
- Reconsider how long you need life insurance if you have a term-life policy. If your kids will be in college and the mortgage paid off in 10 years, you may not need to keep paying premiums on a 20-year term policy.
- Consider a Waiver of Premium Rider
- A waiver of premium rider allows you to stop paying premiums — but keep your coverage — if you become disabled and can’t work. You’ll need to include this when you first buy coverage and your disability will have to meet the rider’s rules, but it can keep you from losing coverage if you can no longer pay your premiums due to an accident or injury.
- Shop Around
- No matter what other steps you take to lower your premium, comparing insurance quotes from several different insurers gives you the best starting point
It’s important to think ahead when buying life insurance. You want to know exactly how much you’ll be paying for the duration of your policy and how that will fit into your long-term budget and retirement planning.
5 Cited Research Articles
Annuity.org writers adhere to strict sourcing guidelines and use only credible sources of information, including authoritative financial publications, academic organizations, peer-reviewed journals, highly regarded nonprofit organizations, government reports, court records and interviews with qualified experts. You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines.
- Texas Department of Insurance. (2022, June 14). Life Insurance Guide. Retrieved from https://www.tdi.texas.gov/pubs/consumer/cb018.html
- Louisiana Department of Insurance. (n.d.). Consumers Guide to Life Insurance. Retrieved from https://www.ldi.la.gov/docs/default-source/documents/publicaffairs/consumerpublications/life-insurance-guide.pdf
- Minnesota Commerce Department. (n.d.). Buying Life Insurance. Retrieved from https://mn.gov/commerce/consumers/your-insurance/life-annuities/buying-life-insurance.jsp
- New York State Department of Financial Services. (n.d.). The Cost of Life Insurance. Retrieved from https://www.dfs.ny.gov/consumers/life_insurance/the_cost_of_life_insurance
- New York State Department of Financial Services. (n.d.). Life Insurance. Retrieved from https://www.dfs.ny.gov/faqs/consumer_faqs/life_insurance?page=1
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