How Much Does Life Insurance Cost?

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.

Factors That Determine Life Insurance Cost

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.

Age

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.

Gender

Women have longer life expectancies, so they typically pay lower premiums than men of comparable age and health.

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.

Factors That Don’t Affect Life Insurance Rates

• 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.

— Stephen Kates, CFP®

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.

Average Annual Rate, $500,000, 20-Year Life Insurance, 2024

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 2023, according to independent insurance broker Policy Genius.

Average Monthly Rate, $500,000, Whole Life Insurance (Healthy, Non-smoker), 2023

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.

9 Things You Can Do to Lower Your Life Insurance Costs

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.