Life insurance is often something you don't think about until you start a family and need to begin securing their financial future - but how much does it cost to get life insurance and is it really worth it? Unlike auto or home coverage, life insurance is not generally required, and it's easy to let the idea keep slipping away. It is essential, however, to make sure your family and beneficiaries are taken care of in the event of unforeseen circumstances. We have written this post to answer some of the common questions about the cost of life insurance so you can make an informed decision.
For a young adult, the monthly cost of life insurance is usually between $20-$50. The actual cost is based on a list of factors that affect your risk of coming into harm. Most insurance companies use a combination of the following items to determine your monthly premium.
- Smoking / Drug Use
- Driving Record
- Family Medical History
- Amount of Coverage
We will briefly go over how each of these affects your insurance cost and answer some related questions. Then we'll recommend you some of the best life insurance cost calculators we found online.
There are so many options and figures to think about when deciding on a life insurance solution that many people chose to not think about it. Having that protection in place is very important for your family and loved ones, and they deserve the foresight and preparation. We've tried to simplify the information surrounding the cost of life insurance to make it easier to focus on the more essential things. Read on to learn more.
Life insurance cost is based on how likely it is that something is to happen to you, resulting in death. Naturally, age is an essential factor in the calculation that insurance companies perform. Due to this, insurance costs can increase as an insured person gets older unless their policy details prevent it from growing. It's essential to keep in mind though, that age is only one of many factors. An older person will not necessarily pay more than a younger person with a more risky lifestyle or habits.
Drug Usage and Lifestyle
The most significant indicator of overall health and longevity is drug use and lifestyle. Someone who uses tobacco products or other harmful drugs is introducing toxic chemicals into their body. This increases the premium because people who abuse drugs and live a more risky lifestyle are experiencing dangers that other people don't encounter. Insurance carriers may ask if you engage in activities such as sky diving, mountain climbing, or racecar driving because those activities also increase risk and would fit under the lifestyle category.
Your driving habits and how well you have driven in the past also affect your life insurance premiums. In 2018 there were 36,750 crash fatalities as determined by the National Highway Traffic Safety Administration. Insurance carriers weigh your driving record heavily when determining your coverage and premiums.
Your biological sex will determine the probabilities that you experience certain health conditions and your average lifespan. The fact is that ordinary women live about five years longer than men. Since they are more likely to pay premiums for a more extended period, they generally get lower rates.
Health and Family Medical History
Insurers will sometimes ask you to perform a physical exam before providing coverage so that they can get an overall picture of your health. If they don't require a medical review, then it's likely they would ask your doctor for your past medical records. During the interview or questionnaire used to generate your life insurance quote, you will likely be asked several questions about your family's medical conditions and history. The insurance carrier is trying to build an overall health profile on you so they can fairly price your premiums.
Amount of Coverage and Policy Type
The total amount of benefit or pay-out that a policy provides is directly related to your monthly cost. There are also several types of life insurance policies to consider. We'll detail the two most common types, so you have a better understanding of how they work.
This is the most simple life insurance. It is in place for one to thirty years. It only pays the guaranteed death benefit upon the death of the policyholder. There are no additional benefits with a term policy.
Whole Life or Permanent Insurance
This policy pays a death benefit regardless of what age the policyholder dies. There is no term length. An additional benefit of whole life policies is that they build up cash value over time that you can use later in life or can be added to the pay-out.
What is the cost of a $500,000 term life insurance policy?
A popular choice among many people looking for life insurance is a term policy for $500,000. Is this the right choice for you, and what could the costs be?
A common rule of thumb is to get the coverage that is 5 to 10 times your annual salary. That would suggest that a $500,000 policy would be right for someone who earns between $50,000 and $100,000 a year. The cost of a $500,000 term life policy depends on several factors like the duration of the selected term and the variables we summarized earlier.
Here are some estimated numbers for an average healthy man of age 35.
- Approximately $24 a month for a 15-year policy
- Around $32 a month for a 20-year plan
- Roughly $49 a month for a 30-year plan
Online Life Insurance Calculators
We can find average costs online for all kinds of policies, but to better understand your available options, you can try some online life insurance calculators. These are designed to take some necessary information and use that to give you a quote for the monthly insurance costs. Here are some of the best we found online.
Fidelity Term Quote Tool
Fidelity is a reputable financial institution, and it offers a simple and straightforward term life quote. It also breaks down the monthly cost and gives you the option to see different prices based on your health status. Click here for more information.
AIG Direct Life Insurance Calculator
This life insurance calculator is composed of two steps and provides more information than the rest. The first questionnaire will help you determine your life insurance needs based on your lifestyle and current income. Then you can click "price this option" to go on to the cost calculator based on the coverage amount you were shown. Click here for more information.
Haven Life Policy Rate Estimator
Haven life has the easiest to use and informative life insurance cost calculator from the ones we tried. The interface is intuitive, and while you fill out the form with your necessary information, there is a column on the left that shows examples of real premiums currently being paid by customers similar to yourself. We suggest this estimating tool to anyone wanting a quick and simple estimate based on current premiums. Click here for more information.
A Worthwhile Investment
Setting up your life insurance plan is something you only have to do once, and you shouldn't let seemingly complicated financial information keep you from moving forward. We hope we have helped you by providing you with the knowledge and tools you need to sort all of this information out.