How Much Does Life Insurance Cost

When you’re young, single and independent, you don’t need to think much about protecting your assets if you die. But when you reach certain milestones, your financial life and responsibilities change. After you get married, buy a home or have a child, you must consider how your loved ones will carry on without you.

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Life insurance protects your assets and your family’s future. When you’re gone, your life insurance policy can help temporarily replace your income, allowing everyone you love to remain in their home and continue their goals, like a college education. With careful planning, you can find life insurance coverage that will give your family just the right amount of financial protection, when they need it most.

How much does life insurance cost?

The insurance industry sets rates based on the risk it incurs when providing coverage. To provide coverage for high risks, an insurer will increase a premium rate or offer the customer optional coverage for added protection.
If you live in an area prone to natural disasters like earthquakes or floods, you might need to add earthquake or flood insurance to your standard homeowner policy for maximum protection. Likewise, the life insurance industry considers risk factors when determining the cost of your policy, but in some cases your personal risk factors may disqualify you from coverage. Life insurance risk factors include:

  • Your age: Insurers use your age to estimate the probability of you dying while holding a life insurance policy. It’s best to purchase a life insurance policy while you’re young, otherwise you may not qualify for coverage. Typically, life insurance companies won’t write new policies on people 60 to 80 years old. Maximum ages vary by company. However, if you purchase a 20-year term life policy at age 40, the carrier may allow you to extend the policy at the end of the term at a higher rate. Some providers have a minimum coverage age of 18 to 20 years old.
  • Your physical build: The relationship between your height and weight, expressed as your body mass index, plays a role in your life insurance rate. Medical professionals and insurers determine your BMI by dividing your weight by your height. A high BMI can indicate that you have too much fat, which could lead to diabetes or heart disease. For the best life insurance rate, you must maintain a proper weight-to-height proportion. Insurance providers always consider BMI when determining your eligibility for life insurance.
  • Your physical condition: In some cases, diagnosed physical conditions may disqualify you from purchasing life insurance or lead the insurer to charge you a higher premium. Typically, insurance companies ask you a lot of health questions to determine your eligibility for coverage and many carriers require you to take a physical examination. Serious physical conditions such as cancer, Parkinson’s disease and even depression can shorten your life expectancy. Pre-existing conditions can impact the price you’ll pay for life insurance.
  • Your family’s health history: Your family’s health history can be an indicator of your future health. For example, if your parents have a history of heart disease, you may have a higher risk of having the same condition in the future. Typically, an insurer will ask questions about the health of your parents, siblings and grandparents and the age and cause of their deaths. According to the Centers for Disease Control and Prevention (CDC), heart disease and cancer cause the most U.S. deaths, claiming more than 1.2 million lives annually. If your family has a history of high-risk diseases, an insurer may charge you a higher life insurance rate.
  • Your personal habits: The provider will ask you questions about your drug and alcohol use and inquire about your lifestyle. The insurer wants to know if your current or past environment puts you at risk of a shortened life expectancy. If you once worked around hazardous chemicals, you may experience health problems in the future. Likewise, if you participate in potentially dangerous activities, such as mountain climbing or skydiving, the carrier may consider you a high-risk insurance candidate.
  • Your occupation: People who work in environments that can result in accidents or exposure to hazardous materials may pay high life insurance rates or not qualify for coverage. For instance, a construction worker faces the risk of fatal injuries, while a lab technician may contract a life-threatening disease through exposure to pathogens. Nearly 170,000 Americans die from accidents each year, the third highest cause of death.
  • Your location: Mortality rates vary by location. Communities with access to health care and good environmental conditions typically have lower mortality rates than areas where air pollution and insufficient medical care have a major impact on people’s health. If you often travel abroad to countries prone to terrorist attacks or plagued with unsanitary conditions, an insurer may place you in a high-risk category.
  • Your gender: At all ages, and among all races and places of origin, U.S. females have a higher life expectancy rate than males. For instance, 13 percent of women live to the age of 75, compared to only 11.3 percent of men, according to 2017 CDC estimates. Consequently, life insurance companies often charge male policyholders higher premiums.
  • Smoking and vaping: If you smoke cigarettes or cigars or chew tobacco, you can expect to pay more for life insurance because tobacco use is a known cause of serious illness and death. Underwriting guidelines vary among companies on smoking marijuana, vaping flavored e-liquids, which may or may not contain nicotine, and using smoking cessation products, like nicotine patches. Some insurers classify vapers and marijuana users as smokers, while others class them as non-smokers.

What is the average cost of life insurance?

Life insurance companies base your insurance rate on your personal factors, so don’t rely heavily on generic rates you may see published here or elsewhere. However, to illustrate the types of rates some people pay, we turned to the JCR Insurance Group, a life insurance broker that sells policies for numerous life insurance carriers. The following term life insurance rates are based on individuals who are non-smokers and in good health.

$500,000, 30-year Term
monthly premium
Female, age 20
$23
Male, age 20
$29
Female, age 30
$26
Male, age 30
$31
Female, age 40
$41
Male, age 40
$51
Female, age 50
$94
Male, age 50
$128

The illustration gives you a good idea how rates differ according to gender and how you can enjoy a lower premium if you purchase a policy while you’re young. Using the same profile, we also researched the cost of universal life coverage.

$250,000, Guaranteed to age 121
monthly premium
Female, age 20
$57
Male, age 20
$68
Female, age 30
$79
Male, age 30
$90
Female, age 40
$114
Male, age 40
$131
Female, age 50
$178
Male, age 50
$199

Based on a 2020 report in Forbes, a 30-year-old healthy male would pay about $4,100 per year for a $500,000 whole life policy.

If you’re looking for the cheapest coverage available, a term life policy may provide the coverage you need. A term life policy pays a lump sum to your beneficiaries if you die within the term, which they can use for expenses such as burial costs and college tuition and to temporarily replace your lost income.

Whole life policies pay a lump sum when you die too, but over time, they also build a cash value, which you can borrow against or cash out after reaching a certain balance. Universal life policies are like a modern, updated version of whole life coverage, which earn interest based on money market rates.

How can I get my life insurance premium to be lower?

For the lowest life insurance rates, follow a few simple tips:

  • Shop around for the best price. You may request quotes from individual insurers or get quotes for several providers through a life insurance brokerage.
  • Compare the cost of different coverage amounts. Sometimes, you can get more coverage for a lower price. For example, an insurer might offer a lower rate for a $250,000 term life policy than for $200,000 in coverage.
  • Look for term life insurance policies that include a term renewal guarantee. Term renewal guarantees allow you to renew your policy at the end of the term without submitting to a new health examination. Your rate will increase, based on your age at the time of renewal, but you won’t face additional increases based on your current health.
  • Find out if you’re eligible for employer-sponsored life insurance. If your employer offers life insurance through your benefits plan, you could enjoy the savings of group rates. Purchasing an employer-sponsored policy also offers the added benefit of paying your premium through payroll deduction, in many cases.
  • Maintain good health. If you already eat a healthy diet and maintain a fitness regimen, stick to it. If you smoke, quit now for future savings. Although you might not qualify for a life insurance premium decrease right away, your insurer may offer a rate reduction after you’ve been smoke free for a few years.
  • Take advantage of discounts. Many major insurance companies offer discounts to customers who purchase multiple policies. You may earn a hefty discount by bundling auto, home and life insurance policies.
  • Bottom line

    If you have a family, the question isn’t whether you should buy life insurance but rather which type and how much coverage you need. Obtaining life insurance may seem daunting and in some cases it’s an uncomfortable task, especially if you have pre-existing conditions that make finding coverage more difficult. But by persevering, you can find a policy that can protect your family’s assets while allowing them to continue living full and productive lives.

    Find the Best Life Insurance

    Enter your ZIP code below and be sure to click at least 2-3 companies to find the very best rate.

    The post How Much Does Life Insurance Cost appeared first on The Simple Dollar.

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