What Is the Cost of Life Insurance?
The best time to purchase life insurance is while you’re young. For example, a 30-year-old woman in good health would pay an average of $25 a month for a 30-year, $500,000 term life insurance policy. However, a woman in her 55s may spend seven times that amount or more.
Find out how much a life insurance premium will cost, what variables affect it, which life insurance companies are the best, and how to save money.
Policy Type
Permanent life insurance plans are more costly than term policies since they are intended to last your whole life. As you can see from the above statistics, the premium for a permanent insurance can actually be up to ten times more than that of a term policy for the same coverage. While universal life insurance is more reasonably priced, whole life insurance often has the highest rates among permanent plans. Both are meant to insure you for as long as you are alive, but whole life insurance typically ensures that your premium won’t go up as you become older.
Your premium will be recalculated depending on your current age if you choose to keep a renewable term life insurance policy after it expires (and you haven’t changed the policy to permanent coverage). Additionally, it will reset annually if you decide to maintain the policy, making it far more expensive than a permanent life insurance policy with the same level of coverage.
Term and Amount of Coverage
Your premium will also depend on how much coverage you buy. Your policy will cost more the more coverage you choose. How do you decide how much coverage you need? One method is to figure out how much money each of your children will require for college by multiplying your yearly salary by 10. The DIME technique, which takes into account your debt, income, mortgage, and children’s education, is a comparable strategy.
Although these figures are a fantastic place to start, you should consider more than just your pay. The Insurance Information Institute advises getting at least enough life insurance to cover your family’s expenses, including “hidden” income and perks like home care and health insurance offered by your job.
Demographics and Health
When determining whether to cover you, life insurance companies take into account a number of independent criteria that are beyond your control. These consist of:
Age: Since younger applicants are more likely to pay premiums for a longer period of time, they usually pay the lowest rates. Generally speaking, premiums rise with age; the older you are when you get an insurance, the higher your premium will be. Additionally, because many insurers set their issue age at 75 or 80, it might be challenging to obtain life insurance as a senior.
Gender: The CDC reports that men’s life expectancy is 73.2 years, while women’s is 79.1 years.
As a result, they often pay more for the same coverage. All gender identities are covered by the majority of life insurance carriers, but if you’re transgender, you might need to provide extra paperwork.
Health: Compared to those of the same age with poorer health, individuals in exceptional health pay the least for life insurance. The cost of coverage will likely increase if you have a medical condition like diabetes or high blood pressure. Life insurance companies may refuse to insure you if you have a disease that might endanger your life.
Family medical history: Your life insurance rates may increase even if you are in good health if there is a history of serious sickness or inherited diseases in your family. For instance, you might have to give more information about your family’s medical history and probably pay more for coverage if many members of your family have been diagnosed with the same kind of cancer.
Way of life
Higher premiums will be reflected in your increased risk of death if you jump or climb mountains. In a similar vein, your rates may increase if you have a high-risk job. The cost of life insurance is higher for firefighters and pilots than for accountants. Additionally, your rates will increase if you smoke or drink excessively. However, if you stop smoking, certain companies could reduce your life insurance premium.
Insurance Score Based on Credit
When determining your premiums, life insurance firms in certain states take your credit score into account. Your credit report’s contents, such as recent debts and bankruptcies, are the basis for this score. Your life insurance rates are not influenced by your credit, although certain aspects of your credit history may.