Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Sep 13, 2021

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Insurance Q&A: “How much does life insurance cost?”

Obviously, there is no exact answer to this question. Life insurance premiums can vary widely depending on a few key factors. The single best piece of advice is to shop around and compare quotes from many different companies before purchasing.

You should also evaluate the different types of life insurance carefully and determine which one is best for your situation.

How does the type of life insurance factor into the cost?

If you are unsure about the best type of policy, then start with getting some term life insurance quotes since term life insurance is not only the most inexpensive type of life insurance but is the best choice for the vast majority of people who do not have complex estate planning needs.

Term life insurance policies, as the name suggests, last for a certain period of time, designated the term.

It is important to understand that life insurance companies make money by collecting insurance premiums and investing them in relatively secure investment vehicles.

The longer you live (and pay premiums) the more money an insurance company makes on your policy.

Here’s a quick example of a ten-year term life insurance policy for $100,000 to illustrate the concept:

You pay $50 per month for 10 years (and don’t die). Your insurance company would earn $6,000 in premium ($50 x 120 months), plus however much they can earn on the investment of those funds.

The insurance company would not have to pay out any money, they simply profit from the transaction when the policy ends.

You obtain the same policy above, but die six months into the policy; the insurer would only earn $300 in premium ($50 x 6 months).

Not only that, but they would have to pay out the $100,000 death benefit. As you can see, the expectation of the term life policy is that you don’t pass away while it is in force.

What about a whole life insurance policy? Whole life insurance is a permanent policy that stays in force until you die. This type of life insurance coverage is more expensive, but it often comes with a cash value component, and your beneficiaries are guaranteed to get a death benefit payout.

The average cost of whole life insurance per month is $52, but the premium will vary considerably based on a number of factors.

Universal life insurance is another option. It is also a type of permanent life insurance, but it involves investment in the stock market, so this is a better choice for those who are not risk-averse.

Many life insurers also offer additional coverage options in the form of riders, which might include long-term care coverage, accidental death coverage, or coverage for chronic illness. Adding riders will increase your monthly premiums.

The least expensive type of life insurance is burial insurance, which is designed specifically to cover funeral expenses.

So what are the key factors considered by life insurance companies when it comes to calculating your premium?

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How does your age affect the cost of life insurance?

It’s simple math. The younger you are, all other things being equal, the less likely you are to die while a term life policy is in force.

And the longer an insurance company can expect to collect premiums for any type of cash-value policy prior to paying out the death benefit…which is inevitable on the latter.

That said, the younger you are, the lower the premium you can expect to pay for a life insurance policy.

According to, “a healthy 40-year-old male who buys a 20-year level policy, which has a fixed annual premium, might pay $350 per year to secure a $500,000 death benefit.”

They go on to say that a healthy 50-year-old man who buys the same policy might pay $1,000 a year.

How does the death benefit factor in?

How much money the life insurance company agrees to pay out in the event of your death is another prime factor in how much your premium will cost.

You will need to calculate how much life insurance you need before seeking life insurance quotes.

Again, all other factors the same, if you choose a $1,000,000 death benefit you can expect to pay quite a bit more than if you are seeking a policy with a benefit of just $50,000.

[What do life insurance companies test for?]

How does your health status affect the cost of life insurance?

Your health history is another highly considered factor that goes into the cost of life insurance.

Clearly, your health is a great indicator of your life expectancy, so you can expect to pay a lower premium if you’re in excellent health at the time your policy is issued.

This is why you may be subjected to a battery of health tests when you apply for a life insurance policy. The insurer is not simply willing to take your word that you are not experiencing health problems, and will want to look into your medical history and current status very thoroughly.

If you are in bad health, you may consider looking into guaranteed issue life insurance policies. But it is recommended you exhaust all other avenues prior to seeking this type of policy.

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What’s the bottom line?

Life insurance rates vary significantly by the factors discussed above, and by the policy type you choose to buy. If you’re not sure how much coverage you need, use a life insurance calculator online. These tools evaluate information like your annual income, standard of living, and outstanding loans, and give you a good idea of how much life insurance you can afford to purchase.

Term life coverage is cheaper, but many people prefer to know their policies will be in force for their entire lives.

You’ll also find that different life insurers have different rates, so it’s a good idea to shop around for the best deal. It’s also a good idea to consult with financial advisors before making decisions about life insurance.

Obtain insurance quotes online or visit an independent insurance agent to start your life insurance policy search.

Read more: How much life insurance do I need?