How Much Does Life Insurance Cost?

When it comes to life insurance, you have two main options: term life and whole life. The type you choose will affect your life insurance costs. Other factors that affect costs include your age, gender, and health history.

Here’s what you should know about how much life insurance costs, factors that affect your rates, and how to save money on life insurance.

How much is life insurance?

The overall average cost of life insurance is $153 per month, based on data from Insurify partner SelectQuote. This average premium accounts for different policy types, ages, term lengths, and coverage amounts. Seniors generally pay more for life insurance. Gender is another factor, with women typically paying less for life insurance.

Choosing between term life insurance and whole life insurance will also affect your premium payments. The following sections outline the different average rates for term life insurance policies and whole life insurance policies.

Cost of term life insurance

Term life policies last for a specified policy term — from a one-year term to a 30-year term. If you buy a term policy, your beneficiaries will receive a payout only if you pass away during the policy term. At the end of the term, you may have the chance to renew your policy.

The table below shows the average rates for term life insurance based on different ages, term lengths, and coverage levels.

Pros and cons of term life insurance

Term life insurance can be a good option if your beneficiaries need financial protection for a finite time. But it’s not the right choice for everyone. It’s important to consider the advantages and disadvantages of term life before committing to a policy.

Who should consider term life insurance

Term life insurance comes with lower premiums, which makes it a good choice for people on a budget. For instance, a younger parent who has high child care costs but still wants life insurance might choose a term life insurance policy to cover their family until their children are college-aged.

Cost of whole life insurance

A whole life insurance policy (also known as a permanent life policy) offers lifelong coverage. When you buy a whole life policy, your beneficiaries will receive a payout when you pass away — it doesn’t have to occur within a specified term.

Whole life insurance policies build up cash value over time. The cash value is typically tax-deferred, and you can borrow against it in certain circumstances.^[2]

The following table shows the average monthly cost of $250,000 and $500,000 whole life insurance policies based on the insured person’s age and gender.

Pros and cons of whole life insurance

The idea of cash value may sound attractive, but that advantage comes at a cost — premiums for whole life are generally significantly higher than for term life insurance policies. Whole life can be a good choice for some people, so it’s important to consider the advantages and disadvantages before buying a policy.

Who should consider whole life insurance

Whole life insurance has higher premiums but also typically comes with a cash value component that grows — tax-deferred — over time. This type of policy can be a good choice for high-income individuals or people who have a specific investment or savings goal.

For example, a parent with a disabled child might consider whole life insurance as a way to save toward the child’s financial stability when the parents are no longer alive.

Factors that affect the cost of life insurance

Like other forms of insurance, life insurance has several rating factors, which are personal details that affect your insurance costs.^[3] Here are a few to keep in mind:

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  Age

  The older you are, the more you’ll pay for a life insurance policy.

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  Gender

  Women have longer lifespans than men, which leads to lower premiums.

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  Health status

  People with chronic conditions — like diabetes, high blood pressure, or other health problems — typically pay higher life insurance premiums.

• 

  Personal habits

  Harmful habits, like smoking, and dangerous recreational activities, like skydiving, can lead to more expensive premiums.

• 

  Coverage level and term

  Whole life policies are more expensive than term life policies. Similarly, term life policies with longer coverage terms are typically more expensive.

• 

  Insurance company

  The insurance company you choose will affect your rates. Choosing an insurance company with discounts and low rates can help you save.

Tips for calculating how much life insurance you need

Purchasing the right amount of life insurance coverage ensures your beneficiaries will have financial security if you pass away. Finding a coverage level that meets your insurance needs can be tricky.

Here are some options for estimating how much life insurance you should buy.

10x your income

Multiplying your income by 10 is a simple way to calculate life insurance needs.^[4] It’s not the most exact method, but it can help give you a rough estimate. For instance, when you just multiply income, you don’t consider your debts and other expenses. Plus, it doesn’t account for inflation, which will devalue your income as the years pass.

Income x 10 + $100,000

After you multiply your income, add an additional $100,000 to your coverage to account for any education costs. The average annual cost of four-year colleges ranges from $9,800 for public colleges to $40,700 for private colleges.^[5] Adding $100,000 can help cover a dependent’s college tuition. Overall, policyholders with dependents should consider this method in order to meet future education costs.

Income + cushion

Choosing to simply multiply annual income may not cover all your family’s future expenses. If you pass away, your loved ones need support to handle final expenses, such as funeral or cremation costs. A cushion can cover these costs. If you stay home, a cushion can also help handle child care expenses in the event of your passing.

DIME

The DIME method stands for “debt, income, mortgage, and education.” Simply add your debt payments, future lost income, mortgage payments, and education costs together to get a more comprehensive estimate of your insurance needs.^[6] Though this calculation is a bit more complicated, it’s a great option for people with outstanding debts or a sizable mortgage to pay off.

How to save on life insurance

Life insurance is financial protection for your loved ones, so it makes sense to get the best life insurance policy you can afford. Here are some strategies that can help you save money when buying life insurance:

• Bundle policies. While home and auto bundles are more well known, your insurance company may also offer a discount if you purchase home, auto, and life insurance from the same insurer.

• Know when discounts kick in. Certain discounts kick in at set thresholds — for example, $250,000 or $500,000 limits. Purchasing a coverage level right below one of those thresholds might not be cost-effective.

• Consider lifestyle changes. Quitting smoking or other habits that negatively affect your health may help you find more affordable life insurance.

• Compare quotes. Just as you would comparison shop for affordable car insurance, you should compare multiple life insurance quotes. Receiving quotes from more than one insurance company and comparing them side by side is the best way to find savings.

How much is life insurance FAQs