How Much Does Life Insurance Cost? Less than Most People Expect

Don’t assume you can’t afford a life insurance policy. You may already know that life insurance is an important financial tool. It will make sure that your loved ones are provided for no matter what happens to you. It can cover funeral costs, as well as mortgages and other debts. It can be used to pay for your children’s college tuition or to make up for lost wages.

For all of this, you might assume that you would have to pay a hefty price. But what you might not know is that some life insurance policies are actually very affordable.

Common Misconceptions

The 2019 Insurance Barometer Study conducted by Life Happens and LIMRA found that many Americans seriously overestimate the cost of life insurance. Among those surveyed, the median guess for a 20-year $250,000 policy for a healthy 30-year-old was $500, which is approximately three times the actual costs.

This misconception may explain another finding of the study. While 66 percent of people say they need life insurance, only 57 percent of people say they have it. The top reason provided for not purchasing life insurance is the cost. 

If you’re like many people, you may be assuming that life insurance is far more expensive than it actually is. This false belief may be preventing you from buying a policy, leaving your family unprotected.

Factors Determining Price

Maybe you think life insurance is expensive because you’ve heard of policies with high premiums. This is possible. Many factors determine the cost of a life insurance policy, meaning that there is a wide range in premiums.

These are some of the factors that will impact how much you pay for life insurance.

  • Age, Health and Risk: The younger and healthier you are, the less you will pay for life insurance. This is one reason why people are often advised to purchased life insurance sooner rather than later. Other factors that impact your risk, such as your gender and whether you smoke or enjoy dangerous hobbies, can also impact your life insurance classification and thus your premium.
  • Coverage Amount: The death benefit, or amount paid when the insured dies, can vary considerably. Some life insurance policies are designed to cover burial costs and may only be for about $10,000. Other life insurance policies can be for $1 million or more. Many life insurance policies fall somewhere in between. When picking your coverage amount, you should think about how you want the money to be used (for example, paying off a mortgage or replacing income) and how much you’ll need.
  • Type of Policy: Life insurance policies come in two main types: term and permanent. Term life insurance policies are written to last for a certain period of time – for example, 10, 20 or 30 years – after which they expire if not renewed. Permanent life insurance policies last for the length of the insured’s life as long as they are maintained, and they accumulate a cash value that can be accessed during the insured’s life. Term life insurance policies tend to be far less expensive than permanent life insurance policies.

How Much Will You Pay?

A 35-year-old man who doesn’t smoke and is in good health might pay $21 per month for a $500,000 20-year term policy, according to Consumer Reports.

How much you’ll pay will depend on many factors, and different insurance companies may charge you different premiums. The best way to find out how much you’ll pay is to contact a licensed insurance agent to get a quote.

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