How much does life insurance cost?

If you haven’t invested in life insurance, because you think it’s too expensive, you’re not alone. It’s reasonable to think that a million-dollar life insurance policy would be costly, but in actuality you can afford substantial life insurance. A policy that fits your needs is probably more affordable than you think.

Compare the cost of Term life and Permanent Life Insurance

There are two main choices when it comes to life insurance term life or permanent life (also known as whole life insurance). One of the main differences between these two types of life insurance policies is how much they cost.

Term Life Insurance is more affordable

Term life insurance is often chosen for its price tag. If you are comparing options on cost alone, you will most likely choose term life insurance. A person in excellent health will have, on average, a life insurance monthly premium from $20 to $40 a month for a life insurance benefit up to $500,000. Term life insurance policies are sold for specific periods of time, typically up to 30 years. Look for a term life policy that provides “guaranteed level” premiums, so that you can maintain the same premium throughout the length of your policy. This well help you plan financially. You can also opt to pay your premium annually, which usually comes with a discount. When the term length ends, your policy will be canceled unless you renew it. If you should pass away while the policy is still active, your designated beneficiaries will receive the death benefit payout.

Permanent Life Insurance costs more but lasts a lifetime

With permanent life insurance policies, you could pay as much as 10 times more than term life insurance. You can fix your premiums with a permanent life insurance policy. When you pass away, your beneficiaries would receive a fixed death benefit that you established at the time you bought your policy. Another benefit of whole life insurance policies that they have a cash value that you can borrow against. With every premium payment you make, a portion is put into a savings that you can pull from when you need cash. How much you can borrow and when is established by the life insurance provider. 

How are life insurance rates calculated?

Your life insurance provider will use an underwriting process to determine your monthly premium. That process includes weighing several personal factors. Here are some of the factors that go into determining your life insurance premium.

Type of Policy

Term life insurance policies are usually the more affordable option as they only last for a certain period of time. Their premiums are also fixed, while whole life insurance premiums tend to increase anywhere from 8% to 10% as you age.

The Amount You Choose

The amount of life insurance benefit you need will impact your monthly premium. The higher the benefit, the higher the monthly premium.

The Length of Your Term Life Insurance Policy

You have options when it comes to how long you want your term life policy to be. It can be 10, 15, 20, 25, or 30 years. The longer the term you choose, the more expensive your monthly premium will be. The older you get, the higher the risk for the life insurance company, because the more likely they will be required to pay out on the death benefit.

Your Health

You will most likely be required to have a medical check up at the time of purchasing your life insurance policy. Your health status will impact your insurance premium. The healthier you are the better your premium. Your premiums will be higher if you have high blood pressure, HIV/AIDS, chronic illness, high cholesterol, hepatitis, hypoglycemia. You can also expect to pay more if you use nicotine or recreational drugs.

Your Age

Your age will also impact your life insurance premiums. The older you are the more you can expect to pay on premiums whether you go with term or permanent life insurance.

Your Hobbies

You might not think about the risk associated with your hobbies, but your life insurance company will. If you enjoy extreme sports like skiing, climbing, or hang gliding, you are considered a higher insurance risk. You may pay higher premiums for both term and permanent life insurance.

Your Gender

Men typically pay higher life insurance premiums than women because men tend to have a shorter lifespan.