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How Much Does Life Insurance Cost?

Life insurance premiums are mostly based on your health and other personal factors, like your age, occupation, and lifestyle.


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Overview

Life insurance provides financial protection for your loved ones when you pass away. It can be a worthwhile investment if your family members rely on your income. But when it comes to cost, life insurance works differently than other policies you might have, like home or auto insurance. 

Life insurance premiums are mostly based on your health and other personal factors, like your age, occupation, and lifestyle. You can control some factors, but not all. In this article, we’ll look at what affects life insurance premiums, and share a few tips for getting the most affordable policy.

What’s the Average Cost of Life Insurance?

It’s difficult to determine an average cost of life insurance because rates depend on so many unique factors. But to give you an idea of what you might pay, we can look at data from the 2023 Insurance Barometer Study from the Life Insurance Marketing and Research Association (LIMRA).

According to the study, a 30-year-old will pay less than $200 per year for a 20-year term life insurance policy with $250,000 in coverage. So, depending on the type of policy you choose, your coverage limit, and your age, you could pay less than $20 per month for life insurance.  

However, you might pay significantly more for life insurance based on your policy choices and personal rating factors. For example, Mutual of Omaha, one of the largest life insurance companies, says that rates can range anywhere from $20 to hundreds of dollars a month.

Factors That Affect Rates

Life insurance premiums are different for every individual. When you apply for coverage, most insurers require a comprehensive medical exam or health questionnaire and an interview. The insurance company uses the information from the medical exam and interview to determine how risky you will be to insure. 

These are some of the biggest rating factors that insurers use to calculate life insurance premiums.

Age

Your age has a notable impact on your life insurance rate. In general, life insurance is cheaper when you’re young and in good health. Rates tend to get more expensive as you get older and develop more health issues that could potentially shorten your life expectancy. For instance, you’ll probably pay more for life insurance at age 50 than you would at age 35.

Gender

Gender doesn’t have a significant impact on life insurance rates, but it’s usually a consideration when insurers set premiums. Because women tend to have longer life expectancies than men, they often pay slightly less for life insurance. Men are viewed as riskier to insure because the insurance company may have to pay out a claim sooner than it would for a woman.

Health

Arguably, the most important factor in life insurance premiums is your health. If you have a clean bill of health, you’ll probably pay much less for life insurance than someone with conditions like diabetes, high blood pressure, or high cholesterol. The most serious health conditions, like cancer or dementia, can even disqualify you from traditional life insurance.

If you’re unable to get life insurance because of your health, you have options, like guaranteed issue life insurance. As the name suggests, guaranteed issued life insurance provides guaranteed coverage, regardless of your health. But it’s typically very expensive and is only available with a small death benefit.

Lifestyle

Lifestyle factors, like tobacco use, hobbies, and even occupation, can contribute to life insurance premium. If you smoke or use tobacco, you can expect to pay a much higher premium than a non-smoker. If you have adventurous hobbies, like skydiving or rockclimbing, an insurer will likely charge a higher premium. And if your job is dangerous (think construction or manufacturing), you could also pay more for life insurance.  

Policy type

There are a few different types of life insurance. The main ones are term life insurance, which offers temporary coverage, and permanent life insurance, which provides lifetime protection. Typically, term life insurance is more affordable than permanent life insurance. However, term life insurance only lasts for a set period of time (usually between five and 30 years). If you outlive the term, your beneficiaries aren’t entitled to any money. 

Coverage limit

The coverage limit you choose, also called the death benefit, is the amount of money your beneficiaries receive when you pass away. As you might imagine, life insurance policies with higher death benefits have more expensive premiums. Some types of life insurance, like universal life insurance, have flexible death benefits that allow you to increase or decrease your coverage limit if your family’s financial needs change over time.

5 Ways to Get Cheaper Life Insurance

Life insurance can be expensive depending on your personal rating factors and policy preferences. But it’s possible to get more affordable coverage. You can use these five tips to get a cheaper life insurance policy:

  • Choose a term life policy: Term life insurance is usually cheaper than permanent life insurance, especially if you’re young and healthy. Most term policies can be converted to permanent coverage if you outlive the term. 

  • Manage health conditions: If you have any health conditions, make sure you’re managing them correctly with a medical professional. 

  • Stop smoking: If you smoke or use tobacco, quitting will reduce your premium. Smokers typically pay much higher premiums than non-smokers. 

  • Buy coverage at a young age: If possible, get life insurance while you’re young. Premiums get more expensive as you age due to the increased likelihood of health issues that could shorten your lifespan. 

  • Compare multiple rate quotes: Before you purchase life insurance, it’s a good idea to get personalized quotes from a few different insurers. Comparing quotes can help you find the best price for the type and amount of life insurance coverage you want.

Editorial Disclaimer: Opinions expressed here are the author’s alone. This post contains references to products from one or more of our partners and we may receive compensation when you click on links to those products.

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