Life Insurance Shopping Guide Chapter 2: How Much Does Life Insurance Cost?

Learn how much life insurance really costs, and how much coverage you need.

Colin Lalley 1600

By

Colin Lalley

Colin Lalley

Associate Content Director, Home & Auto Insurance

Colin Lalley is the associate content director of home and auto insurance at Policygenius, where he leads our property & casualty editorial teams. His insights have been featured in Inc. Magazine, Betterment, Chime, Credit Seasame, Zola, and the Council for Disability Awareness.

Published|3 min read

Policygenius content follows strict guidelines for editorial accuracy and integrity. Learn about our editorial standards and how we make money.

You’re reading Policygenius’ 4-part guide to shopping for life insurance.

Click here for Chapter 1: Understanding Life Insurance

Click here for Chapter 2: How Much Does Life Insurance Cost?

Click here for Chapter 3: How Do I Choose a Life Insurance Policy?

Click here for Chapter 4: Applying For Life Insurance

How much does life insurance cost?

The real answer is: It depends. But most people can get covered for under $30 a month.

The following are sample rates for a 20-year policy for a 35-year-old man based on Preferred health ratings.

Average cost of life insurance

The cost of a life insurance policy depends on five main factors:

Your policy

Life insurance cost increases as the death benefit goes up and the term increases. Get a policy that meets your needs, but don't overinsure and pay more than you need - we'll talk about that more later.

Your health

If you have detrimental health conditions, like diabetes or high cholesterol, it may increase the cost of your policy. However, some carriers are more lenient than others for certain health conditions.

Your age

There's no way around it: as you get older, your life insurance prices go up - at a rate of 8-10% a year.

Your hobbies

Potentially dangerous hobbies like skydiving can increase your policy cost.

Your gender

On average, men will pay more than women for comparable policies.

That means that the cost of life insurance will be different for every person. But avoid pushing off your application under the assumption a policy is unaffordable, because most people overestimate the cost and waiting just makes it that much more expensive.

quote

More than half of people think term life insurance is at least three times more expensive than it actually is.

gray twitter icon

Calculating your life insurance needs

Figuring out how much life insurance you need is a relatively straightforward process. You can use a free life insurance calculator to crunch the numbers and provide suggestions for you, or you can do it yourself with some quick math:

Financial assets - (Debts + Obligations) = Coverage amount

Financial assets

Your assets are anything you own that have value. That means things like savings, investments, and your house and car (if they're paid off).

Existing debts

Most people start with enough coverage to pay off their major debts:

  • Mortgage

  • Student loans

  • Credit card debt

Basically, anything that is either co-signed by another person or would eat into your estate if you died.

Genius Tip

There's such a thing as being overinsured, meaning you’re paying for coverage you don’t really need. Don't choose a benefit amount that's substantially more than what your family will need.

Future financial obligations

Next, start thinking about the income that your family would be missing out on if you died prematurely. How much money would never make it into the retirement accounts, college funds, and day-to-day budgets?

Here are some of the things you may want to get coverage for:

  • A college fund for every child (Remember to adjust for increasing college costs!)

  • Care for an aging parent

  • A retirement fund for your spouse

  • Lost income (for at least one to two years)

Total up your assets, subtract your currents debts and future obligations, and you'll have a good starting point for how much coverage your loved ones would benefit from.

If you're still having trouble - maybe you don't know what your future financial obligations will be - you can multiply your income by 10 or 12 and come up with a decent ballpark number on the fly.

Takeaways: Life insurance cost checklist

  • Know that life insurance cost is largely made up of your policy, health, age, hobbies, and gender

  • Calculate your coverage amount by subtracting your debts and financial obligations from your assets - or by using a free life insurance calculator

  • Multiply your income by 10 or 12 for a quick ballpark coverage number

  • Make sure you aren't overinsured and paying for extra coverage you don't need

Life insurance isn't as expensive as most people think. By making sure you're getting the right coverage amount, you can also make sure your policy fits your budget.