How Much Does Life Insurance Cost?

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A life insurance cost calculator is a crucial tool to uncover how much life insurance costs? A quick search on google can equally show you the average cost of life insurance quickly gives you an answer: $27 a month. But does it actually end there?

Life insurance should be “a -must-have” for you. The full benefits of life insurance can only be fully appreciated by your loved ones. This is because of the financial burden it takes off their shoulders.

At this moment, you might pause and wonder – how much does life insurance cost? There is no direct answer to this question, due to the several factors that play a role in the determination of life insurance cost. These factors range from the company you select, your age and gender, your health status, the type of death benefit amount you purchase, and the kind of insurance policy you buy.  But then, the cost of life insurance is not as high as most people assume. Most people assume the cost of life insurance is over three times the actual cost.

The reality is there are affordable life insurance packages. You only have to figure out the numerous factors and how they influence the life insurance rates that would apply to your unique circumstance.

The secret is that even your small budget can accommodate life insurance coverage. But then, you must equally understand premiums are calculated and the various charges that might be attached to life insurance policies. This helps you make a smart and informed decision about the appropriate life insurance coverage you need. Understanding how much life insurance costs will equally help you avoid hidden charges.

What is Life Insurance Premium?

But then understanding the cost of life insurance begins from understanding the most critical terms you will come across – life insurance premiums.

The word “premium” stands for payment. So, a life insurance premium simply means the payment you make to your life insurance company to hold on to your life insurance policy. This payment is the cost of the kind of coverage you choose.

In a situation where the recipient dies, a death benefit or payout would be paid to the beneficiaries of the recipient. However, if you choose a life insurance premium plan that you can’t afford to pay in the future, and then default on payment, your beneficiaries or members of the family may lose the death benefit.

It is very important that you go for a premium plan that suits your budget or you can afford it. Payment of premiums to most life insurance companies is made monthly, quarterly, or annually.

How Much Does Average Life Insurance Cost; Determining Your Life Insurance Premium

Most life insurance companies allow their support teams to determine the amount each life insurance premium will cost. Their support team puts things into consideration to help them determine the cost of those to classify applicants as standard, preferred, and super preferred. Super preferred is usually the healthiest category with lower risks.  This could range from your current health status, age, family medical history, and several others.

Every life insurance company has its own unique way of determining life insurance premiums using the factors I just listed above. Some after factors may equally influence how much your life insurance costs, but these factors may not be directly influenced by you.

They include the company’s ability of service, the financial risk the life insurance company is ready to take,  financial strength, and how flexible their products are. These factors can increase a life insurance policy increase in average cost which in turn drives up the overall value. Let’s talk about each factor in detail.

Factors That Influence How Much Life Insurance Cost

1. Age

If you feel the main time to get a life insurance policy is at old age, then you have to rethink. Because it will definitely cost you more if you wait to get life insurance at an older age. So, it is advisable to always buy life insurance coverage when you are young, especially if you are going for a permanent life insurance policy. This will help you pass your physical exam easily. Your life insurance premiums will remain stable if you get permanent life insurance at a younger age.

Regardless, according to S & P Global Market Intelligence, rates for a $250,000 term life coverage by age are:

average life insurance cost by age

Overall, life insurance costs tend to go higher after age 45. So a policy will cost more when bought at middle age or retirement than when purchased higher.

2. Kind of coverage

There are several kinds of life insurance. However, term life insurance and permanent life insurance (whole life insurance) are more prevalent. Although, the kind of policy you select will influence the life insurance cost.

For term life insurance policies for a specific period is about 10, 15, 20, or 30 years.

However, policies for permanent life insurance (whole life insurance) take effect for your whole life, if you are faithful to your payments. That is why the premium for permanent life insurance is regularly higher than that of term life insurance, especially if you are young and very healthy.

The fact remains that term life insurance would give you an amazing value for your money, especially if you are young and healthy. Adults who have not advanced much in age can also benefit from it because it can help them focus on paying for coverage that is important to their exact needs.

Read this: Whole versus term life insurance; what is the true difference

3. Sex

If you are a healthy woman, you will likely pay a lesser amount of life insurance, when compared to a man of the same age as you. This is because men are assumed to have a shorter life expectancy. Most developed countries have the average life expectancy age of men as 72 years and that for women as 79 years. On average, men pay 23% more for term life insurance than women.

Below is a typical example of the difference between the cost of insurance for a 35-year-old male and a female seeking a $250 death benefit for a 30-year term policy.

gender impacts on the life insurance cost

4. Term length

Term length greatly influences the insurance cost especially when it concerns premiums for term life policies For example, an insurer would spend more on paying a death benefit for a 30-year policy than for a 20-year policy. So, the amount you will be charged for a 30-year policy will be higher than that of a 20-year policy.

This implies that you can only purchase a policy for the number of years you will be needing coverage. For instance, if you take an academic loan that you are meant to pay within 10 years, you should purchase a term life policy that will protect your academics, if you lose your income and cannot service the loan. In this scenario, it would be financially wise and economical if you purchased a 10-year policy rather than a 30-year policy.

5. The Amount of Coverage

The amount of coverage is another factor that can influence how much your life insurance costs.  Do keep in mind that you might need to keep your premiums low to avoid over-insurance. For instance, if you qualify for a million dollars in coverage at a bargain but your family only receives $700,000 coverage, then you are paying an extremely high premium.

But then, how do you avoid this? It’s important to use a life insurance calculator to determine how much coverage you require.

6. Health

Having good and stable health is essential when trying to determine your insurance premium. If you have a pre-existing health challenge, have lifestyle habits such as smoking, or come from a family with a history of cancer or heart problems, you might pay higher insurance costs.

This is why insurance companies typically ask you to go through a medical examination and routine questions to verify your current status. Hence, you will require an Attending Physician’s Statement.

Nevertheless, no matter the severity of the health condition you have, many insurance companies would still give you life insurance coverage.

average cost of life insurance for smokers and nonsmokers

7. Occupation

Some occupations are filled with lots of hazards and dangers. If your job is a fisherman, firefighter, logger, crane operator, roofer, and so on, then most insurance companies might charge you higher. But then, don’t forget to thoroughly research and compare different insurance quotes to figure out the best life insurance rate for you.

8. Hobbies and lifestyle

Your lifestyle and hobbies might be factors that are capable of affecting the kind of insurance coverage you get. If you often go mountain climbing, skydiving, hunting, and so on, then your life insurance policy might be higher than other people that are not involved in high-risk hobbies or lifestyles.

9. Driving history

If you are a frequent driving offender with major traffic violations, DWIs, or DUIs, then you might likely have higher life insurance coverage rates.

10. Policy size: The expected amount to be given to your loved ones

Another vital factor that can affect the price of your life insurance policy is the amount that would be given to your family members or loved ones if you pass on. A large policy implies that you will have to pay higher amounts of premiums, and your family or beneficiaries would receive huge benefits.

Most insurance companies might set a barrier to how much you can claim when equated to how much you earn. The death benefits that are supposed to be paid to your family members or beneficiaries might be restricted to a certain amount if it supersedes the amount when compared to how much you earned, during the term of your insurance policy.

When looking for a life insurance policy, you should consult a financial expert. You will need to give all the necessary information an insurance underwriter needs to assess the premium and a life insurance fact sheet would be vital before you sign a contract.

11. Location – insurance rates by state

Your location isn’t supposed to typically influence the life insurance rates you pay. However, there will always be slight differences due to different standards of living alongside provider rates and coverage amounts in that location.

Other critical details: Insurance rider

Some online purchasing options can guide you to quickly purchase good life insurance policies. But then you need to critically assess what’s in front of you to spot insurance riders. Insurance riders allow you to customize your existing life insurance policy for a small additional cost. Usually, these riders can be grouped into two: the death benefit and the living benefit.

If you designate living benefits to your beneficiaries after your death, you can use some of their money for your needs while still alive. A death benefit in contrast only applies to your beneficiaries after death. Beyond these two major classes, there are a few different life insurance riders you would find.

One is the accelerated death benefit (or living benefit), which gives you access to your money to cover unexpected expenses such as the cost of treatment for terminal illness. In most cases, insurers will advance you to a portion of the base policy’s death benefit but then you need to check the insurer’s definition of ‘terminal illness. There are also other kinds of insurance riders such as accidental death riders, critical illness riders, child term riders, and many more. All of these may slightly increase your insurance. In some cases, you might need to purchase them separately or they come as an add-on built into the policy. The bottom line is to only choose insurance riders that are suitable for your unique circumstances.

Additional life insurance fees

Also, realize that the anticipated fees your beneficiaries will receive will be less as there are some industry-standard fees to be deducted from your premium and cash value. Here are some common life insurance charges and fees:

  • Administration fees: A fee will be deducted monthly to cover accounting and record-keeping costs.
  • Life insurance costs: This is what insurance protection costs. The amount of the death benefit will depend on your life expectancy, health, and gender. Usually, this fee is charged monthly.
  • Fund management fees: Fees will be dedicated from the cash value of your insurance premium to paying fund managers.
  • Sales charge/premium loads: Sales and tax expenses will equally be deducted monthly and are paid before the payment of the policy.
  • Surrender charge: Surrendering or terminating your policy during the surrender charge period can result in a deduction from your cash value. You should always evaluate the surrender charge period when comparing policies.
  • Monthly per thousand charges: Underwriting classification, gender, and classification will contribute to this charge. As the name implies, your service provider will also assess the monthly fee.
  • Mortality and expense risk charge: Your health, gender, and current age will be used to estimate your risk level and how long you live. In the event you don’t live to an estimated age, a mortality & expense charge is applied.

What Does Not Impact How Much Your Life Insurance Cost?

  • Credit score: Your insurer will look at your credit score, although it will directly affect the cost of your insurance premium that way. But then if you have bankruptcy on record, you might be deemed a higher risk, which increases your life insurance premium. Also, find out how often you should review your life insurance policy.
  • Marital status: Life insurers don’t have different rates for married applicants, unlike auto insurance companies
  • Number of life insurance policies you have: This will not affect the cost of life insurance but then you might need to justify why you are purchasing an enormous amount of coverage over multiple policies
  • The number of beneficiaries: Whether you have one or five life insurance beneficiaries, your rates won’t be affected.
  • Your sexual orientation, race, or ethnicity: Insurers generally, use biological sex and age and will not discriminate based on elements of diversity.

Life Insurance Cost Frequently Asked Questions

Can A 70-year Old Get Life Insurance?

Yes, you can buy life insurance if you are over 70. Although it isn’t the best choice, life insurance should be bought at a younger age. There are a good number of life insurance services you can purchase. All you need to do is compare policies to figure out the most suitable.

Will My Life Insurance Quote Match The Premium?

Generally, you get a life insurance quote when you provide basic information such as your health history, gender, and get. But this first is a rough estimate. The actual life insurance quote happens after the underwriting process. This is because the underwriting process will assess details you may not have been aware of. Perhaps, you’ve received a lot of speeding tickets lately, so your risks are higher which in turn increases your life insurance premium.

What Is A Better Term Or Whole Life?

Do realize that each type of insurance comes with its pros and cons. Term life coverage may seem affordable but it’s temporary and has no cash value. In contrast, whole life insurance premiums are more costly but they last your lifetime, and the policy grows in cash value. However, if you are on a budget, you can also consider a combination of term and permanent life insurance to help you save money. That way, you have insurance cover now, and when your budget increases, you can switch from term to permanent coverage.

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