How Much Does Life Insurance Cost in 2023?
Typically, a 10-year $250,000 life insurance policy, for a healthy 40-year-old individual, may cost anywhere between $15 to $17 per month. It is always a good idea to get policy quotes from multiple life insurance vendors to have a rough estimate of your per month premium cost. Policy rates are different for each individual as they are determined by various factors, including age, gender, medical conditions, income, and many more.
How Much Does Life Insurance Cost
The average monthly premium for a $500,000 20-year term life insurance policy for a 40-year-old individual, is $27 per month. Please refer to the table below to find more descriptive information for average life insurance costs in 2022.
Average Cost of Life Insurance in 5 major U.S. cities.
City, State | Men | Women | ||
|---|---|---|---|---|
Monthly | Annually | Monthly | Annually | |
New York, NY | $32.52 | $383.96 | $17.14 | $201.85 |
Boston, MA | $19.37 | $227.05 | $15.88 | $185.46 |
Washington, DC | $24.73 | $289.87 | $15.88 | $185.46 |
Los Angeles, CA | $19.22 | $226.12 | $16.27 | $191.43 |
Chicago, IL | $24.73 | $289.87 | $15.88 | $185.46 |
| Here are the average costs of the three lowest-priced life insurance policies worth $500,000 for a 20-year term life for a healthy non-smoking 30-year-old individual, in 5 major U.S. cities, categorized by gender (as provided by Quotacy). | ||||
What Type of Life Insurance Policies are Available?
There are over six different types of life insurance policies available to most individuals. Each of these policies offers different policy lengths, cash values, premiums, and coverage plans. All life insurance policies fall into one of two categories; term life insurance and whole life insurance.
Term Life Insurance
Such a policy is bought for a specific number of years with a fixed term life, typically between 10 to 30 years. This is often considered to be the simplest form of life insurance and is suitable for most people. It is also referred to as “pure life insurance” as it does not have an associated cash value. It is designed to pay the beneficiaries only when the primary policyholder dies during the term. Otherwise, the policy simply expires once the term life is fulfilled. Some life insurance policies that offer term-based options are as follows.
- Simplified issue life insurance
- Guaranteed issue life insurance
- Group life insurance
Whole Life Insurance
Such a policy is bought to last your entire life. It is often referred to as “permanent life insurance” as it does not have an expiration date. Whole life insurance policies typically offer a cash value component to which you have unlimited access. This means that a portion of the premium that you pay each month is allocated to a cash-value account, where this money compounds over time and is untaxed.
You are allowed to withdraw or borrow from this account as long as you are alive. Upon the death of the policyholder, a death benefit is paid to the beneficiaries. This amount is typically signed for on the policy contract at the time of purchase. Some life insurance policies that offer whole or permanent life options are as follows.
- Universal life insurance
- Variable life insurance
- Simplified issue life insurance
- Guaranteed issue life insurance
- Group life insurance
What Factors Influence the Cost of Life Insurance?
A big reason why it might be hard to find generic cost estimates for life insurance is the fact that most life insurance companies assess customers on a variety of factors before ascertaining a premium cost. Factors such as age, gender, coverage amount, tobacco use, and various others are used by life insurance agents as they review your profile. They are trained to use a tool called an actuarial table, which helps them determine an individual’s chances of death. It is important to note that factors like your ethnicity, race, sexual orientation, marital status, and credit score do not and should not impact your policy rate.
Gender
The first, and probably the most defining factor for your life insurance policy rates is your gender. With all else held equal, on average women tend to pay almost half as much as men for the same life insurance policy. This is because the U.S. actuarial tables show that women typically live longer and have a greater life expectancy than men. In the cost table above, we clearly see that policy rates for women in all 5 major U.S. states are consistently lower than those for men.
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Smoking Status
When you go online to get a quote for your life insurance policy, one of the first few questions you are asked is about your tobacco use and smoking habits. It has been established that the life expectancy of a smoker is at least 10 years shorter than that of a non-smoker. Since smoking puts you at a higher risk of developing fatal health issues, life insurance companies usually charge a higher premium to customers who use tobacco or nicotine in any form.
Average Cost of Life Insurance by smoking status.
Smoking Status | Men | Women | ||
|---|---|---|---|---|
Monthly | Annually | Monthly | Annually | |
Weekly Cigarette Use | $74.80 | $876.96 | $54.96 | $701.15 |
Occasional Cigarette Use | $58.17 | $679.98 | $44.46 | $558.31 |
| Here are the average costs of the three lowest-priced life insurance policies in LA, worth $500,000 for a 20-year term life for a 30-year-old individual based on smoking status, categorized by gender (as provided by Quotacy). | ||||
Health
Life insurance companies also take your overall health into consideration when reviewing your profile. Any pre-existing medical conditions, use of blood pressure medication, cholesterol medication, history of illness in the family (conditions such as cancer, diabetes, or heart disease), your height, and weight are important indicators of your health. Insurance companies have a range of heights and weights that are acceptable for each price. A high body mass index (BMI), or height to weight ratio might prevent you from getting affordable rates.
Average Cost of Life Insurance by BMI status.
BMI Status | Men | Women | ||
|---|---|---|---|---|
Monthly | Annually | Monthly | Annually | |
Healthy | $19.22 | $226.12 | $16.27 | $191.43 |
Overweight | $19.37 | $227.05 | $17.42 | $204.20 |
Obese | $29.70 | $344.95 | $19.48 | $228.34 |
| Here are the average costs of the three lowest-priced life insurance policies in LA, worth $500,000 for a 20-year term life for a 30-year-old individual based on BMI status, categorized by gender (as provided by Quotacy). | ||||
Policy Term Length
When looking for term life insurance, the longer your term length, the more you pay in premium. This is true for both men and women, across all age groups. The reason is that when a customer purchases an insurance policy with a longer-term length, it is more likely that the insurance company would have to pay the death benefit before the term ends. However, longer-term lengths also help customers lock in a standard premium rate which they will pay until the end of the term without having to worry about higher premiums once they are older.
Average Cost of Life Insurance by policy term length.
Term Life | Men | Women | ||
|---|---|---|---|---|
Monthly | Annually | Monthly | Annually | |
15 years | $14.60 | $171.12 | $12.97 | $152.56 |
20 years | $19.22 | $234.48 | $16.27 | $191.43 |
30 years | $29.73 | $349.82 | $25.06 | $294.82 |
| Here are the average costs of the three lowest priced life insurance policies in LA, worth $500,000 for a healthy 30 year old individual based on the policy term length, categorized by gender (as provided by Quotacy). | ||||
Age
It comes as no surprise that age is another important factor that is used to determine what you pay for your life insurance. Your cost of life insurance may increase by anywhere between 8 percent to 10 percent, for each year that you age. The closer you get to your expected life span, the higher your insurance company will charge you for your policy. The rate by which an additional year increases your cost of life insurance also varies by your age. For instance, your policy rates will be 5 to 8 percent higher when you are in your 40s but will increase by 9 to 12 percent for a person in their 50s.
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Average Cost of Life Insurance by policy term length and age.
Age / Term Life | 10 years | 20 years | 30 years | |||
|---|---|---|---|---|---|---|
Men | Women | Men | Women | Men | Women | |
30 yo | $154.90 | $134.64 | $234.48 | $191.43 | $349.82 | $294.82 |
40 yo | $209.89 | $179.90 | $339.92 | $284.81 | $589.45 | $466.79 |
50 yo | $474.83 | $384.83 | $827.67 | $647.93 | $1490.40 | $1123.47 |
60 yo | $1284.45 | $854.05 | $2361.90 | $1673.29 | N/A* | N/A* |
70 yo | $3684.79 | $2319.29 | $9297.87 | $8204.86 | N/A* | N/A* |
Here are the average annual costs of the three lowest priced life insurance policies in LA, worth $500,000 for a healthy individual based on age and policy term life, categorized by gender (as provided by Quotacy). *These policy quotes are only available to the client upon directly contacting the company. | ||||||
Life Insurance Frequently Asked Questions (FAQs)
Here are a few frequently asked questions about life insurance.
What is life insurance?
Life insurance is a contract between a policyholder and the respective insurance company, where the company guarantees to pay a sum of money to the insurer’s family or other beneficiaries, upon the death of the insurer. This sum of money is referred to as a “death benefit”. This contract may be valid for a fixed period of time, or for the insurer’s lifetime, based on the type of policy they buy. It is a common form of financial asset. As of 2020, over 54 percent of Americans have some sort of life insurance coverage.
Who needs life insurance?
While there is no clear-cut requirement for any individual to buy a life insurance policy, it is good practice to think of it as a financial investment for your loved ones. Experts suggest that those who have people in their lives who would be financially impacted by their death should consider purchasing a life insurance policy. Typically, upon an individual’s death, the people most impacted financially include their heirs, spouse or partner, children, and other dependents. Having any active debts which you plan to pay off over a long period of time, is another reason to consider getting life insurance.
How is life insurance different from health insurance?
Health insurance is a contract that is designed to help the insurer afford medical expenses while they are alive. Most health insurance plans offer partial or full coverage of services such as doctor office visits, lab tests, pharmacy, and medication costs, dental treatments, vision checkups, and so on.
A life insurance plan on the other hand is typically meant to payoff upon the death of the insurer. The insurer’s beneficiaries are paid a death benefit to provide them with financial support and resources.
Bottom Line
Choosing to purchase a life insurance plan can be a very personal decision, as it might make one think of their family and loved ones’ needs when they are not around. It is also an important financial decision as it helps supply monetary assets to your beneficiaries, and can be a smart way to park resources. It is always a good idea to consider a variety of options before deciding to sign a contract with one company.
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Girisha is a second-year graduate student at Columbia University, pursuing a Master's in Public Health. She is excited to combine her passion for Public Health and writing with the hopes of delivering quality health information, one article at a time!
