NEWS & ARTICLES INSURANCE GUIDE

If you’re looking for affordable life insurance, chances are you’re going to go with a term life insurance policy. Life insurance prices are always fluctuating, and before you start shopping, it’s helpful to know what the average cost of a policy is, so you can determine if you are getting a good deal or not. In this article, we’ll discuss the average term life insurance prices of 2020, and tips for finding the most affordable options.

term life insurance prices

What is term life insurance?

Term life insurance is a life insurance policy that only lasts for a specific period of time, often 20 years. You’ll be covered through that period of time, and if you die while your policy is active, your beneficiaries will receive a payout of the full value of the policy. If you are still alive at the end of your policy, you can opt to let it expire or purchase another policy. Many people prefer term life insurance because it is more affordable than whole life insurance. It’s also common to take out life insurance as a precaution, to ensure that family members can pay any remaining mortgage debt you’ve taken on, or so that kids can pay for college. For many consumers, it’s not necessary to continue to have life insurance once they’ve taken care of these expenses.  Term life insurance is by far the cheapest form of life insurance, except for group plans sponsored by your company.  The downside of term life insurance is that it expires, so you may outlive the policy.  It also does not have any cash savings value, which a permanent form of life insurance will have.

Average Costs by Age

Term life insurance is much more affordable for young people than it is for older people. The reasoning for this is simple. Life insurance companies consider you to be more of a risk as you get older. You’re more likely to have developed health problems that could contribute to your death, which means they’re more likely to have to pay out a policy. To combat this, they will charge you higher premiums to offset the financial risk they’re taking by insuring you. Average insurance costs for a 25-year-old for a half-million-dollar death benefit are $269.30 per year, while average costs for a 40-year-old are $417 per year. By the time you reach 65, your average costs are much higher, at $5,285 for an equivalent policy amount.

Average Costs by Term

The longer your life insurance policy covers you for, the more expensive it is going to be. A 10-year policy averages $561 per year, while a 30-year policy averages $1,499 per year. This means the 30-year policy costs almost three times as much per year as the 10-year policy does. You might be wondering, why would anyone buy a longer policy at this rate? The answer is that when you buy a policy, your rate generally stays the same for the entire time you have it. If you get a 10-year policy and let it run out, your rates will likely be higher if you want to buy another 10-year policy, because rates tend to go up as you get older.

Average Costs by Policy Amount

When setting up your policy, you can choose how much you want your death benefit to be. The higher your death benefit, the higher your premiums are going to be. For example, a 40-year-old who takes out a $500,000 life insurance policy will pay an average of $2,184 per year. However, if the same 40-year-old were to take out a $1 million life insurance policy, they would pay an average of $6,108 per year.

Term Prices

As you can see, prices from different companies are very closely grouped for the most part. Price is affected by being male or female, age, term length, and amount. See below to get a feel for how these factors affect the price.
CompanyFace AmountPrice per MonthGenderAgeLength
Pacific Life$250,000$13.28Male3520 Years
AIG$250,000$13.51Male3520 Years
Banner William Penn$250,000$13.48Male3520 Years
Protective$250,000$13.79Male3520 Years
Pacific Life$500,000$21.04Male3520 Years
Protective$500,000$20.98Male3520 Years
Banner Williams Penn$250,000$21.54Male3530 Years
Pacific Life$250,000$21.23Male3530 years
Protective$250,000$18.45Female3530 Years
William Banner Penn$250,000$18.62Female3530 Years
Protective$500,000$30.15Female3530 Years
Protective$500,000$60.77Female4530 Years
Pacific Life$500,000$78.79Male4530 Years

Smoker vs. Non-Smoker

Another factor that life insurance companies take into consideration when they determine your premiums is your health habits. You’ll be asked to provide your medical history when you apply, and you’ll also have to take a physical exam in most cases. There are many things they take into account, but one of the biggest factors is whether or not you smoke. Since smoking has been known to cause a wide range of long-term health problems, life insurance companies consider it to be a big risk. The best life insurance for smokers will depend upon several factors such as your location, how much you smoke, how healthy you are otherwise, and how old you are, so you will still need to compare prices from different companies.  The average cost of life insurance for a 50-year-old who smokes is $4287, versus $1064 for a non-smoker – almost four times as much for someone who smokes!

Other Factors That Affect Your Rates

There are a variety of other factors that might affect your life insurance rates, although there’s less data detailing just how much they will affect them. For example, women tend to pay slightly less for life insurance than men do, although the differences are usually quite small. Your location might also influence your life insurance rates, as will certain lifestyle factors. For example, if you frequently go rock climbing or drive race cars, your insurance company might consider that dangerous and raise your rates.  They may also have a rider that excludes them from paying if you perish while partaking in one of those hazardous activities.

Impact of COVID-19 (SARS-CoV-2) on Life Insurance Rates

The COVID pandemic has led to a slight increase in mortality, but not in a way that is significant for people under the age of 70.  People are generally still living long enough to hit their life expectancy.  This means that life insurance rates have not gone up due to COVID-19 in general unless the life insurance company has reason to believe that the insured person presents a higher risk of contracting the virus or already has had it and recovered.

As the pandemic continues to evolve and new information comes out about the infection and health outcomes, or if mutations arising causing a more virulent strain,  life insurance rates will adjust accordingly.

How to Get Lower Life Insurance Rates

Finding affordable life insurance rates can be very tricky. The key is to really take your time and shop around when you are looking for a new policy. Get quotes from as many different companies as you can – you might be surprised by who is offering the cheapest insurance. It can help to work with an independent insurance agent, but you should get quotes on your own as well. Be sure to take care of your health to the best of your ability, as this can also affect your life insurance prices dramatically. Making an effort to exercise and eat healthy not only helps you feel better, but it can also save you money too.  Certain factors, such as your body mass index (BMI), blood pressure, cholesterol, habits, and whether or not you smoke all affect your insurance prices in a big way.  These are all controllable to some extent through lifestyle and medication changes.  If you need to see a doctor to get your health stats in line, doing it before submitting your insurance application can help you get the best rates.

Sources:
https://www.valuepenguin.com/average-cost-life-insurance
https://www.nerdwallet.com/blog/insurance/average-life-insurance-rates/

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