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byPatrick Hanzel, CFP®
Patrick Hanzel, CFP®
CERTIFIED FINANCIAL PLANNER™ & Advanced Planning Team Lead
Updated March 18, 2021|4 min read
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Ready to shop for life insurance? Figuring out how much life insurance you need and comparing rates from different insurers will get you the best policy. Use our free life insurance calculator to calculate the cost of your policy and get just the right amount of coverage to ensure your loved ones are protected.
The cost of life insurance increases 4.5-9% each year you put off buying coverage, based on policies offered by Policygenius in 2021. The younger you are, the lower your premiums, which is why it’s best to buy earlier. You can lock in low rates to protect your family later on.
Women could pay up to 30% less than men for the same amount of coverage on average, based on policies offered by Policygenius in 2021.
Where you live can determine which policies are available to you based on your state’s rules and regulations.
Your policy’s term length is how long your life insurance coverage lasts. Choose a term length that matches or exceeds your longest financial obligation (like your mortgage) so that your loved ones don’t end up liable for those costs. We also have a term life insurance calculator.
Policygenius advisors suggest buying coverage 10-15 times your income, if not more. Even if you’re temporarily unemployed, you should get enough coverage to account for your anticipated future income.
Once you’ve completed these steps, you’ll receive your estimated policy costs. After reviewing your options, you can click the button to get personalized life insurance quotes instantly and compare policies from top-rated insurers.
You’ll have the option of choosing between term and whole life insurance. Whole life insurance is a type of permanent life insurance and accumulates a cash value over time, but it’s usually five to 15 times more expensive than a term life insurance policy, based on policies offered by Policygenius in 2021. Most people opt for term life insurance and look into other means of investing and growing their money, which can also gain more returns.
As Patrick Hanzel, Policygenius’ Advanced Planning Specialist and Certified Financial Planner explains, "Due to the complexity and pricing of whole life insurance policies, term coverage is the recommendation for the vast majority of people. Permanent coverage is usually only suitable for people who have a significant income or assets, complex estate planning needs, or a dependent with special needs."
If you need whole, check out whole life insurance calculator.
Due to the complexity and pricing of whole life insurance policies, term coverage is the recommendation for the vast majority of people.
To calculate your life insurance coverage needs:
Find the sum of your post-tax income and any liquid assets, like life insurance policies you already own, current investments, and future assets like social security benefits.
Account for your yearly living expenses and debt payments and multiply them by the number of years your family would need support. Make sure to include future financial obligations, like college tuition.
The resulting number is the coverage gap—the amount of money your family would need to be financially comfortable in your absence, which is the minimum amount your death benefit should be. Your policy’s term (i.e., the amount of time your coverage lasts) should last as long as your family’s financial dependence requires.
The death benefit is paid as a lump sum, but your beneficiaries shouldn’t use it all at once. Much of it can be invested, and the rate of return can provide additional income to make the benefit last longer—but you’ll also want to consider the inflation rate over a 20- or 30-year term.
Ready to shop for life insurance?
Life insurance is often a lot cheaper than people think it will be. Most people overestimate the cost of a term life insurance policy by more than 3x the actual cost, according to a 2020 study by LIMRA and Life Happens. Several factors determine the cost of your policy, including:
Age: Life insurance is cheaper when you’re younger, and premiums increase 4.5-9% every year you don’t buy
Coverage amount: The bigger the death benefit you select, the higher your premiums
Term: A 30-year policy costs approximately 23% more than a 20-year term policy on average
Here’s a look at sample monthly premiums from 10 life insurance companies for a 30-year-old male and female purchasing a 20-year term policy with a $750,000 death benefit:
Ready to shop for life insurance?
All life insurance companies offer the same financial protection, and thanks to regulations they’re all guaranteed to pay if the worst happens (with some rare exceptions for self-inflicted injury, fraud, and crimes). So how do you decide which is the best life insurance company to work with?
Simple: whichever one gives you the best quotes. Life insurance companies offer the same product, but they have different methods for measuring risk. One company may see you as risky to insure, while another may see you as a relatively safe bet. Therefore you may get a wide range of life insurance quotes from different providers — making shopping around with multiple insurers an important part of the buying process.
The cost of your life insurance depends mainly on your age, health, lifestyle, the length of your insurance term, and the amount of coverage you buy.
Your coverage should last at least as long as your longest debt, or while you have dependents who rely on you financially.
Every life insurance provider assesses the risk of insuring you differently, so once you’ve confirmed their trustworthiness and financial stability, choose the insurer that offers you the most affordable premiums.
The average cost of life insurance for a 35-year-old male or female is $25-30 per month, based on a $500,000, 20-year term life insurance policy.
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