How much is life insurance?: A guide to average costs

Life insurance is designed to financially support your loved ones after you pass away. When you buy a policy, you’ll make regular payments throughout its term. In exchange, your insurance company pays a lump sum to your beneficiaries after your death.

A life insurance policy can be affordable, but it will still add to your monthly expenses. Read on to learn more about life insurance and the factors that can influence how much it costs. 

Key takeaways

  • Life insurance provides money to your beneficiaries, such as your spouse and children, after you pass away.
  • Several factors, such as your medical history and the amount of coverage you buy, can influence the cost of life insurance.
  • Term life insurance policies have a specific end date, while permanent life insurance policies remain active until the insured person dies. 
  • Generally, a healthy 35-year-old man may pay about $370 per year for a 20-year term life insurance policy with a $500,000 death benefit. A healthy woman of the same age may pay $310 per year.

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Factors that can influence life insurance costs

The cost of life insurance can vary widely depending on several factors, including: 

  • Age: Generally, younger people have lower life insurance premiums because they have fewer medical issues. There’s less of a chance the insurance company will have to pay a claim.
  • Overall health: The insurance company may ask for a medical exam and review your past and current medical conditions. This step helps the company calculate your life expectancy.
  • Family medical history: The insurer will also look for patterns of severe illness or hereditary disease across family members when calculating life expectancy. 
  • Gender: Women generally live longer than men, so they may pay lower life insurance premiums.
  • Lifestyle: Things like dangerous hobbies lower your life expectancy, so they may cause your life insurance rates to increase. 
  • How much coverage you buy: Plans with smaller death benefits come with lower premiums. That’s because your beneficiaries will receive less money upon your death.
  • The type of policy you choose: Because term life insurance only guarantees a death benefit for a set period, it’s typically cheaper than whole, universal and variable universal policies, which provide protection for longer terms.

Can a credit score affect the cost of life insurance?

When you apply for a life insurance policy, the insurer runs a soft credit inquiry. It then assigns you an insurance score based on the information in your credit reports. Your credit score won’t influence how much you pay for life insurance. But any negative information on your credit reports, such as a large credit card balance or a bankruptcy, might raise your life insurance premiums. The insurer may even use this information to reject your life insurance application. That’s because negative financial details signal risk to the life insurance company.

Average cost of life insurance by policy type

The average cost of life insurance varies widely by policy type as well as gender and age. Here are the average costs for some popular types of life insurance:

Average cost of whole life insurance

Whole life insurance is a type of permanent life insurance that provides lifelong coverage. As long as the policyholder pays premiums on time, the insurance company pays a death benefit to the policy’s beneficiaries. When you buy one of these policies, you lock in the premium rate for life and a guaranteed death benefit. You also receive a minimum rate of return on the cash value of the policy.

A healthy, nonsmoking, 35-year-old man would pay $571 per month on average for a $500,000 whole life insurance policy, according to Policygenius. For the same policy, the average woman would pay $481 per month.

Average cost of term life insurance

A term life insurance policy expires after a certain number of years, such as 20 years or 30 years. You’ll pay premiums regularly during this time frame. And if you die within the specified term, the insurance company pays your beneficiaries a death benefit.

A healthy, nonsmoking man may pay about $370 per year for a 20-year term life insurance policy with a $500,000 death benefit if he buys the policy at age 35, according to Policygenius. At the same age and for the same type of policy, a healthy, nonsmoking woman may pay about $310 per year.

Decreasing term life insurance

Decreasing term life insurance is a term policy where the death benefit decreases over time at a specific rate. People typically choose this type of policy when they want to pay for a certain type of debt, such as a mortgage. The term lasts as long as the loan, and the benefit decreases as you pay down the loan. The cost is similar to or cheaper than what you’d pay on a term life insurance policy. But over time, you pay less for the same amount of coverage.

Universal life insurance

Universal life insurance is a type of permanent life insurance that offers more flexibility. You’re covered until death as long as you pay the premiums and keep the account in good standing. But the policy also gains cash value, so you may withdraw money or take out a loan against the policy. When you die, your insurance company gives your beneficiary a death benefit that’s reduced by the amount of any withdrawals or outstanding loans. These policies generally cost more than term life insurance and regular permanent life insurance policies.

Average cost of life insurance by age

Age and gender play a big role in how much you spend on life insurance. Generally, women pay less than men because they live nearly six years longer on average. So they’re less likely to die within the specified term. Younger people also pay less for life insurance for the same reason.

Below, the table includes rate quotes for a term life insurance policy by age and gender:

Age Price per month - men* Price per month - women*
25 $30 $25
35 $34 $29
45 $72 $57
55 $170 $123
65 $560 $387

*Rate quotes supplied by Policygenius. Based on quotes for a 20-year term life insurance policy with a $500,000 benefit and policyholders with average health.

What is a good amount to pay for life insurance?

There’s no one “good” amount to pay for a life insurance policy. Instead, the level of coverage you choose depends on your individual needs and specific financial situation. Some financial experts say your coverage should equal 10 to 15 times your current income. So if you earn $50,000 a year and follow this rule of thumb, your death benefit would equal $500,000 to $1 million. But you should consider your unique needs. And before buying a policy, you should get quotes from multiple life insurance companies to make sure you’re getting the best deal.

Life insurance costs in a nutshell

If your loved ones financially depend on you, then life insurance may be an option to consider. These policies pay out a benefit upon your death, which can help support them. Term life insurance protects you for a certain number of years, while whole life insurance covers you until death. The type you choose depends on the costs involved and the coverage you want to leave behind.

In addition to life insurance, having health insurance can also help you and your loved ones to prepare for unexpected circumstances. Check out Capital One’s guide to shopping for health insurance.

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