How Much Does Life Insurance Cost?

Life insurance premiums will vary considerably from person to person. For example, a 30-year-old in good health will pay a lot less than a 62-year-old with high blood pressure. The type of policy, your health status, your age, and the insurer you select will all influence your life insurance rates. Insurers use complicated formulas that account for all of these factors to determine the premiums you will pay. Before you decide to purchase life insurance, make sure you really need it first. You might not need a policy quite yet or you may be able to find a cheaper offer through your employer.

Your Age

Age is probably the most important factor that life insurers consider when calculating your premiums. The older you get, the more likely you are to die. Thus, older people will pay higher premiums than younger people because they are a higher risk for the insurer. As you age, your life insurance premiums will increase unless you lock in a fixed premium with permanent life insurance. Permanent life insurance guarantees you a certain annual premium for the rest of your life. Term life insurance premiums increase as you get older and can become unaffordable in your later years.

Type of Coverage

The type and amount of coverage you purchase will also have a profound impact on how much your policy will cost. Term life insurance is generally the most basic and least expensive type of coverage. How long the term of your policy is will influence your premiums—the longer the term, the higher the cost. Permanent life insurance is initially more expensive than term life, but you get the benefit of locking in a premium for good. Permanent life tends to be pricier than term because part of the money goes toward investments that the insurance company makes on your behalf, which allows your policy to accrue cash value over time.

Your Insurer

Of course, the company you choose to issue your policy will also affect your life insurance rates. Remember that life insurance companies are out to make a profit, and, like all companies, the prices for their products can vary greatly. When you purchase a policy, you want the security of knowing that the company will actually be able to pay out the proceeds of your policy someday. For that security, you would need a company with an A+ rating on the Standard & Poor’s index. This kind of company would be able to charge much higher premiums than an unknown, up-and-coming insurer.