How much does life insurance cost?
The average cost of life insurance can range between $350 per year to $5,000 per year. There are numerous factors which affect the final amount of your premiums including your age, the state of your health, how much you wish to be covered for and the type of policy. Here is a guide on the dynamics which affect the cost of life insurance:
Age
The premiums for any type of policy will always be affected by the age of the insured person.
Clearly, the older you get, the more you will be expected to pay. This is because the risk of you passing away increases as you get older. Here are some examples of how age affects how much you will pay for a 10 year term policy on a person’s life with a preferred rating class and of a healthy weight in California who has never smoked for a coverage amount of $300,000 per year:
- 20-30 year old – female from $132, male from $144
- 40 year old – female from $168, male from $189
- 50 year old – female from $349, male from $414
- 60 year old – female from $711, male from $924
- 70 year old – female from $1,829, male from $3,125
- 80 year old – female from $7,631, male from $11,951
- 85 year old – female from $17,148, male from $26,391
As you can see, the amount you can expect to pay for coverage starts to increase significantly around the age of sixty.
Risk Category
The state of the insured’s health and other factors such as hazardous occupations or being involved in aviation are further considerations which can hugely affect the price of a policy. Insurance companies have their own underwriting guidelines which include risk categories. These are usually comprised of standard, standard plus, preferred and preferred plus. Health related questions which determine your rating class typically include:
- Blood pressure
- Cholesterol level
- Whether you are being treated for hypertension or high cholesterol
- Whether any of your parents or siblings have been diagnosed with or died from cancer or cardiovascular disease before reaching the age of 60
- Whether you’ve been diagnosed with or receive treatment for any of a number of conditions including diabetes, alcohol or drug abuse, kidney disease, depression and even asthma.
Based on your answers to the questions, you will fall within one of their risk categories. Here is this can affect premium payments for a 30 year old male (who is of healthy weight) in Illinois who has never smoked and wants a 10 year term insurance policy with a coverage amount of $400,000 based on the following risk level:
- Preferred plus – starting at $148
- Preferred – starting at $172
- Standard plus – $220
- Standard – $260
There are insurers which offer no-medical exam insurance, however these policies can be more expensive due to the increased risk of not knowing the state of your health.
Smoking Status
This is one of the major factors which can make a significant difference in your life insurance costs. Smoking not only kills you, it also ruins your chances of getting cheap life coverage. Insurance companies see tobacco use as a huge risk factor when issuing policies and accordingly increase the price of insurances significantly for smokers. However, they do take into account if a person has quit and how long they have not smoked for and this can help reduce your cost.
For example, a male aged 34 living in Connecticut wishes to purchase a 15 year term policy for $75,000. His rating class is standard plus and she is of healthy weight. If he had never smoked, his policy would cost from around $213 per annum. If he had quit and had not used tobacco or nicotine in the last year, his premiums would remain the same. However, if the insured is a current user, the price of insurance would escalate to $615 per annum. That’s a huge difference of around $400. He should really consider how much smoking is really costing in terms of health, increased life insurance premiums and of course the cost of cigarettes. One would have to wonder if it’s really worth it.
Payout Amount
As for the amount of coverage, it’s obvious that the more you wish to insure for, the higher rate of premiums you will have to pay. Of course, unlike smoking, this is one factor which you may not be able to control. Whilst you may consider skimping on the coverage amount to save on insurance costs, this is probably not a wise option. You really need to purchase the right amount of coverage to make sure your beneficiaries are protected. There are online calculators which can assist you in finding out how much you need; otherwise a licensed insurance agent can help you determine a figure more accurately.
As each insurance company has their own pricing structure, you can find out how much life insurance will cost you based on payout amounts from each separate insurer. As a general idea, a 39 year old non-smoker female in Idaho who wishes to purchase a 20 year term policy with a preferred rating class can expect to pay around $12 per month for a death benefit of $100,000. For a face value of $200,000, the average monthly premiums increase to $17-$25, $21-28 for $300,000, $28-$35 for $400,000, $33-40 for $500,000 and $60-70 for a million dollar policy.
Term vs Whole Life
Whole life insurance policies are much more expensive than term coverage. This is because part of the premium goes towards a cash value which can earn income from investments on a tax deferred basis. There are different types of whole life insurance including universal and variable policies.
The general idea of permanent insurance is that the cash value accumulates over time through payment of premiums and investment. If the policy is surrendered, the owner gets to keep the cash account balance. The fees and charges associated with these types of policies can escalate the cost of a single life insurance policy up to tenfold. For example, if a 42 year old female pays $390 for a term policy with a $400,000 face value, she is likely to pay upwards of $2,900 for the same death benefit with a whole life policy. Before selecting which kind of policy you should get and how much you should pay for it, you should speak with a qualified insurance professional.
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