Life insurance rates (term, whole) How much in 2022?

Life insurance rates (term, whole) How much in 2022?

If the cost is less than you thought, youre not alone

The Life Insurance Marketing and Research Association (LIMRA) found that most people believe the price of term life insurance is three times higher than the actual cost. Younger Americans are even more likely to overestimate the cost of protection, saying it’s five times the actual price.1 But as you can see, it’s possible to get $1,000,000 of life insurance for under $40 a month.

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Age and Life Insurance

One of the biggest myths that life insurance agents perpetuate is that you’ve missed the boat if you fail to sign up for a policy when you’re young. The industry leads us to believe that life insurance policies are harder to get the older you become. Insurance companies make money by betting on how long people will live.

It’s true that insurance is cheaper when you are young. But that doesn’t mean qualifying for a policy is easier. The simple fact is that insurance companies want higher premiums to cover the odds on older people, but it is very rare that an insurance company will refuse to cover someone who is willing to pay the premiums for their risk category. That said, get insurance if and when you need it. Do not get insurance because you are scared of not qualifying later in life.

Frequently Asked Questions

For most people, the answer to this question depends on their family situation. Life insurance is most important for those who are significant income earners for their household. If anything should happen to you, your income will be difficult for your family to replace if you don’t have sufficient coverage.

We’ve found that the average cost of life insurance is about $147 per month for a term life insurance policy lasting 20 years and providing a death benefit of $500,000. You should think of this number strictly as a baseline — your own rates for life insurance will change depending on your age, the insurer you choose and the amount of coverage you purchase.

Since the cost of life insurance rises as you get older, the most cost-effective strategy is to buy it as soon as you know that you need it. For most people, that moment arrives when they get married or have a child, but coverage can become necessary in any situation where you know someone else will be relying on you financially.

Average Term Life Insurance Rates by Term Length

The length of your policy will affect rates, as the longer the policy lasts, the likelihood of the insurance company having to pay goes up. We looked at average annual rates for 30-year-old males and females buying a policy with a term of 10, 15, 20 or 30 years.

The three main factors that affect term life rates: Its all about you

1

2

3

Your coverage amount

Your term length

Your life expectancy

1. Coverage amount: the more you get, the higher your rates. But…

Term life insurance tends to be affordable, in the sense that you can get a given amount of coverage typically for much less than it would cost with a permanent whole life policy. Still, more coverage will cost more. But if you’re trying to decide between a higher or lower benefit amount, it may help to know that a higher death benefit can be more cost-effective than a lower one. Take another look at the rate chart, and you’ll see that for $500,000 of coverage, a 40-year-old male pays 7.8¢ per $1,000. But when the death benefit is doubled to $1,000,000, the cost goes down to 6.9¢ per $1,000 of insurance.

How much do you actually need? That’s an entirely personal decision, based on where you are in life and how many people rely on your income. However, there are several ways to get an estimate. Our life insurance calculator uses the “Human Life Value” method, which looks at what you’re earning now plus what you expect to earn in the future. (That’s why it asks about your earnings.) Between the ages of 18 and 40, it multiplies current income by about 30; as you get older and have fewer working years left, that multiple decreases.2 There are other methods to estimate your needs:

Consider multiplying your income by 10

Take your annual salary, add a “0” at the end, and there’s your amount. $50,000 salary equals $500,000 coverage, $75,000 equals $750,000, and so on. While this estimation method is very simple, it doesn’t actually take into account your true expenses and needs. That leads us to the next formula, which is just a bit more complex.

Consider multiplying your income by 10 – and add college for each child

This approach gives you the added reassurance of knowing your children may have more opportunities. How much should you add? Account for somewhere between $100,000 and $150,000 per child. If you split the difference – and have two kids – that’s an extra $250,000.

Consider using the DIME formula.

DIME stands for Debt, Income, Mortgage, and Education – four of the big things to consider when making a detailed estimate of your life insurance needs:

  • Debt: Total all your debts other than your mortgage, and add about $7,000 for funeral expenses.
  • Income: Take your salary and multiply by the number of years you think your family needs protection – or at least as long as you have children at home. 
  • Mortgage: Look at your last statement and get the payoff amount. If you have a 2nd mortgage or HELOC (Home Equity Line of Credit), add that in too.
  • Education: The anticipated cost for sending each of your children to college: between $100,000 and $150,000 per child.

Total them all up – then subtract any savings or existing life insurance – and that’s your estimated need. If you go through the exercise of estimating according to each method, you’ll find they each give you a different amount. How do you choose? One more rule of thumb: go with the number that makes you feel best about the protection you’re providing for your loved ones.

2. Term length: A longer coverage period costs less – in the long run

You can get term life policies that last for 1, 5, 10, 15, 20, and even 30 years, but let’s assume you need coverage for 20 years. If you compare two equivalent $1,000,000 policies – one for 10 years, the other for 20 – you’ll see the 20-year policy has higher monthly premiums. Unfortunately, that leads some people to think they can save money with a 10-year policy. However, over two decades, a single 20-year policy will almost always cost less than two consecutive 10-year policies. Why? Because even though your rates will be lower for the first 10-year term, the policy you get a decade later will cost significantly more. One of the most basic rules of life insurance is that it typically costs more as you get older. Also, a lot can happen in a decade. For example, your doctor could find that you have high blood pressure. Even if well-controlled, that kind of diagnosis can cause rates to go up. 

3. Life expectancy: Assessing your risk to the insurance company

Why does life insurance get more expensive with age? Because life expectancy goes down – a key factor used to determine rates. There’s generally less risk to insuring a younger, more physically fit person because they are less likely to die in a given time frame – be it months, years or decades – compared to an older, less healthy person. That’s more than just common sense: It’s a fact proven by actuarial science, the discipline that applies mathematical and statistical methods to assess risk in insurance and other industries. When you apply for a policy with a substantial death benefit, there’s an application and underwriting process:  Insurers gather your information, consider your age, and evaluate your health with questions and, typically, a medical exam which includes blood work to check cholesterol levels and so on. Other items are also considered, including lifestyle and gender: Risky habits and dangerous hobbies (e.g., tobacco use, scuba diving) can make life insurance more costly. Conversely, women tend to live longer, so they generally enjoy lower rates. 

What about “no health exam” policies? Sometimes you’ll hear about life insurance that doesn’t require a medical exam or even health questions. These “guaranteed acceptance” policies tend to offer limited face amounts and can cost much more per $1,000 of coverage than a medically underwritten policy. After all, the insurance company has to assume that applicants have issues with their health status. So while a guaranteed acceptance policy can be an option for seniors who want to cover their final expenses, it may not be a good solution for younger, healthier wage-earners who want enough life insurance coverage to provide for a family.

Average life insurance cost by age

Life insurance changes depending on your age. The price you’ll pay each month for coverage generally increases with each passing year. 

Business Insider obtained quotes from four large insurance companies for people seeking $250,000 worth of term life coverage for a 30-year term, both in excellent health. The average of these four quotes is listed below for each age range:

AgeAverage female quoteAverage male quote
25$18.59/month$22.67/month
30$19.79/month$23.49/month
35$22.95/month$25.72/month
40$29.63/month$34.74/month
45$41.75/month$51.42/month
50$60.68/month$81.23/month

The most noticeable difference is in the older ages of the sample premiums — after age 40, premiums go up significantly. The sooner you get your coverage, the less you could pay each month. Waiting for life insurance coverage won’t make it any cheaper, as the data above shows. 

How Does the Cash Value Benefit Work?

Whole life policies are one of the few life insurance plans that build cash value. What is whole life insurance cash value? It is generated when premiums are paid – the more premiums that have been paid, the more cash value there is. The main benefit of cash value is that it can be withdrawn in the form of a policy loan.

For example, if you have been paying premiums for many years and have an unexpected medical bill or financial obligation, you can call your insurance company and see how much you can withdraw from your policy. As long as the loan and any interest is repaid, your policy’s full coverage amount will be paid out to your beneficiary. If the loan isn’t repaid, the death benefit will be reduced by the outstanding balance of the loan.

Term life insurance rates by policy length

Examining quotes for 10- and 20-year term life policies, the shorter the term length of a life insurance policy, the cheaper the life insurance premiums you will have to pay each year.

We have broken down the premiums by what is called rating class. A rating classification is the health rating that the life insurance company assigns to you after you have taken a medical exam. The rating you receive directly affects the rate you pay for your life insurance policy. These metrics are determined by each individual life insurance provider, but only vary slightly across the industry. Health indicators such as blood pressure, smoking and cholesterol levels impact your rating classification.

10-year term life insurance rates

People who are on a tight budget may prefer 10-year policies because they offer some of the cheapest rates available. Furthermore, a 10-year policy can be useful for someone who may not require long-term insurance.

Policy face value Preferred plus Preferred Standard $100K$16$19$22$250K$23$28$37$500K$35$44$61$1M$59$76$110 Compare rates

20-year term life insurance rates

The most popular term life insurance option on the market, the 20-year term policy, provides longer coverage than its shorter 10-year counterpart, though it comes with higher annual rates.

These policies are usually recommended for young families who often have large debts and expenses, such as mortgages and school loans, that would be harder to pay without one parent’s income.

The 20-year term is typically long enough for the family to substantially pay down these debts and reduce the potential risk of someone else having to foot the bill should something happen.

Policy face value Preferred plus Preferred Standard $100K$17$19$23$250K$25$30$38$500K$40$49$65$1M$69$86$117 Compare rates

Is Life Insurance Needed After Age 60?

While life insurance is often intended to replace the economic loss of someone with a family to support in the event of their untimely death, it can be purchased by those whose children have grown up as well. This can be done for several purposes, including giving an inheritance, establishing a trust upon death, to contribute to a charity, or if the older individual is a key employee or partner in a business.

Still, many insurance companies only offer term policies for those aged 18-65. But depending on the insurer and type of policy, you can even get coverage initiated as old as age 80. Note, however, that life insurance premiums increase the older you are when you purchase the policy.

How Life Insurance Rates Are Determined

Life insurance companies really want to determine one thing: How long are you likely to live?

The information they gather helps to estimate an answer to that complicated question and to calculate the cost of your policy.

What you pay for life insurance depends on the type of life insurance you buy, how much coverage you get, your age and health and the company’s underwriting procedures, among other things. Every life insurance company has its own system for pricing a policy, so comparing rates among multiple companies will help you find the best fit for your needs and budget.

Below are 10 factors that can influence your life insurance rates.

  • Age: One of the most important factors in calculating rates. As you age, the probability that the insurer will have to pay out goes up, leading to higher quotes.
  • Gender: Females have a longer life expectancy, so typically will pay less than males of the same age and health.
  • Height and weight: If your height and weight are within the certain limits, you’ll receive better rates than if you’re deemed overweight or underweight, both of which could cause health problems.
  • Past and current health: How healthy you are significantly affects your rates. Pre-existing conditions are taken into account to determine if they will decrease your life expectancy.
  • Family health history (siblings and parents): If your family medical history shows serious illnesses, especially hereditary diseases, you could be saddled with higher quotes.
  • Nicotine and/or marijuana use: Smokers, other nicotine users (including vaping and the patch) and marijuana users have a higher risk of developing cancer and respiratory diseases, so they’ll be quoted higher rates.
  • History of substance abuse: Abusing drugs or alcohol can lower your life expectancy, resulting in higher life insurance rates.
  • Driving record (particularly DUIs and speeding tickets): Driving under the influence, driving at high rates of speed and/or causing accidents makes you a higher risk and results in increased rates.
  • Credit: Credit is a factor in some risk scores that life insurers use.
  • Criminal history: Having a felony on your record can impact your ability to get a policy. Even if you can buy a policy, a felony will generally increase your costs, especially if you’ve served time as your life expectancy has likely declined.

Beyond the above factors, a primary factor influencing what you’ll pay is the type of life insurance policy you choose.

Life insurance comes in two primary types: term life insurance and permanent life insurance. Permanent life has the advantage of lasting until you die, but is generally more expensive than other types of life insurance. Term life is a more popular choice due to its affordability.

What’s the right amount of life insurance for me?

You want enough life insurance to pay off your mortgage and any other debts, as well as enough to replace your income for however many years your family would need support. If you have kids, you should also factor in the total cost of their tuition, whether it’s for college or private K-12 school. Finally, calculate your potential funeral expenses to get a rough idea of how much life insurance you need. Then use our life insurance calculator.

Why New York Life?

New York Life has been a mutual company for more than 175 years, delivering on its promises to policyholders. Earning solid grades from all four major ratings agencies, we offer a wide portfolio of products that can help you prepare and protect your financial future—and our agents are among the most knowledgeable in the business. No matter which type of insurance policy you decide on, make sure you fully understand what you are purchasing by meeting with a financial professional or someone else you trust to ensure that the policy meets your goals and gives you the protection you need.

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