A recent study by the Life Insurance Marketing and Research Association (LIMRA) found that most people think the price of term life insurance is three times higher than the actual cost. Younger Americans are likely to say it's five times the actual cost.1 To set the record straight, here are some average prices for term life insurance policies in 2021:

The median rate is 11.1¢ per $1,000 of coverage1. Here's what that really means.

If you search the internet for "life insurance rates," you're likely to see rates ranging from 3.6¢ per $1,000 to 18.6¢ per $1,000. That's a spread of over 500%, and if we showed life insurance rates for 60-year-olds, it would be even greater. 

Fortunately or not, the average cost for life insurance is an almost meaningless statistic to you as an individual. While it's true that a 30-year-old female can typically buy life insurance coverage much more inexpensively than a 50-year-old male, that's not always the case. Because in addition to age, gender, and coverage amount (which, as you see, can vary the cost by over 500%!), there are at least four other factors that can affect your life insurance rate to an even greater degree, including:

  • Health status
  • Lifestyle choices
  • Policy type
  • Coverage term

If you're thinking about getting life insurance, it's crucial to have a basic understanding of all those factors, so you can compare options and decide whether you're getting value for your money. Perhaps the most useful and relevant way to start learning about getting affordable life insurance is by getting an actual rate quote for your needs. So try our calculator below - it will give you a complimentary life insurance quote in under a minute, and there is absolutely no obligation involved:

Term life insurance calculator

See how much you need and get an instant quote

What you'll learn from this quote

This calculator shows the monthly cost for a 20-year term life insurance policy, with the correct rate for your age and gender. It recommends a coverage amount based on the "Human Life Value" estimation method, a way of looking at life insurance needs according to what you're earning now plus what you expect to earn in the future. If you're between the ages of 18 and 40, it multiplies your current income by 30; as you get older and have fewer working years left, that multiple decreases.2 There are also other ways of estimating your needs, which we'll get to later.

The cost shown may be higher or lower than you were expecting, just as the policy you end up buying will likely cost more or less. But starting with an educated guess of how much life insurance you might need – and what that could cost – will help you better understand the only rate information that really matters: what you'll actually pay for life insurance once all your choices and variables are factored in. 

Factors that affect life insurance quotes – and what you can do to lower your rate

Whether you start with an estimate from our online calculator or a number from a rate chart, all costs at this point are just estimates. Here's a look into the factors typically considered when setting actual insurance rates. Where possible, we'll also tell you what you can do to affect policy rates when buying life insurance.

Policy type

There are two main life insurance policy types: term (which lasts for a set period, ranging from one to 30 years) and permanent (which lasts your entire life, as long as premiums are paid). To this point, we've discussed term life insurance rates, the most affordable type. With a permanent policy, life insurance premiums can be considerably higher. Universal and whole life insurance rates can be 5 to 15 times costlier than term rates.3

Why are permanent life insurance rates so much higher? For one thing, because protection lasts a lifetime, and the insurance company knows it must eventually make a payout. By contrast, most term policies run out before the policyholder dies, and the insurers get to keep those premiums. Permanent policies also have an added "cash value" component: A portion of your premium dollars can grow over time2.

You can borrow money against the cash value in your policy, use it to pay your premiums, or even surrender it (i.e., sell it) for cash to live on in retirement3. Many people believe that permanent policy types provide greater lifetime value – but if you want to keep your rates down, term coverage can be a valuable option.

Coverage amount

After you've decided on a policy type, this is perhaps the most important lever you have to control premium cost. How much of a death benefit should you get? That depends mainly on where you are in life and how many people rely on your income. In addition to the human life value method used by our calculator, you can try these other rules of thumb to estimate how much of a death benefit you might need:

Multiply 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 straightforward, 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.

Multiply your income by 10 – and add college for each child

This approach gives you the added reassurance of knowing your children can 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.

Use the DIME formula.

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

  • Debt: Total all your debts other than your mortgage. Car payments, credit cards, student loans – even personal obligations such as money you may have borrowed from a relative. And don't forget to 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 as well (if not already included with your debts).
     
  • Education: The anticipated cost for sending each of your children to college: between $100,000 and $150,000 per child.

Consider the human life value formula

Some financial representatives calculate the amount you need using the Human Life Value philosophy, which is your lifetime income potential: what you’re earning now, and what you expect to earn in the future.

In its simplest form, the philosophy suggests that you multiply your income by a variable based on factors such as age, occupation, projected working years, and current benefits.

As with every individual, the amount of recommended insurance you purchase depends on many factors. A simple way to get that number, however, is to multiply your salary times 30 if you are between the ages of 18 and 40. The calculation changes based on your age group, so please refer to the chart:

 Age  

  Insurance  amount

18-40  30 times income
41-50   20 times income
51-60    15 times income
61-65   10 times income
66-70   1 times net worth
71-75    1/2 times net worth

Coverage term

If you get term life insurance, the term length can be varied to help control your rates. The longer your term, the more you'll typically pay each month, and vice versa. Having said that, if you think you need coverage for 20 years, consider getting a single 20-year insurance term, as opposed to 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 may cost significantly more: you'll be older, and you may be diagnosed with a health condition, such as high blood pressure, that causes rates to go up.

Health status

Life expectancy is related to health, so that impacts rates. Most life insurance companies will ask health questions and require a medical exam before issuing a policy, and the premium you pay is based on rate classifications such as:

  • Preferred plus: Perfect health, no family history of medical conditions
  • Preferred: Very good health, with a minor controlled condition
  • Non-Smoker: Problematic Body Mass Index, problematic family health issues, with no tobacco usage
  • Standard: Problematic Body Mass Index, problematic family health issues, with tobacco usage
  • Substandard: Problematic family health history, recent serious health issue

These classifications vary somewhat by insurer, but it's important to remember that no life insurance company expects every prospective customer to be in peak health. If you have a chronic condition such as high blood pressure, it will likely raise your rates. However, if you're taking steps to control your disease, you may be able to qualify for a better rating. You also may want to work with a financial professional to get coverage because various life insurance companies evaluate risk differently. A financial professional may have insights about types of life insurance to consider, how to compare life insurance options and go about applying for coverage. 

Lifestyle choices

Dangerous hobbies, such as skydiving and scuba diving, can raise your mortality risk, as well as the premium you pay for a policy. The health risks associated with tobacco use are also well documented – and will cause your rates to rise. However, if you quit smoking for a year before applying for coverage, many insurance companies will consider you a non-smoker – and you'll enjoy better rates.

Age

One of the most basic life insurance rules is that it gets more expensive with age, which makes sense because the premium cost is largely based on life expectancy. Of course, you can't make yourself younger to qualify for lower rates; however, you can keep yourself from getting older before applying for coverage. If you're thinking about getting a policy, consider doing it sooner than later. 

Gender

Women generally live longer than men, so they qualify for lower life insurance rates. That used to be a moot issue when it came to rates because gender was considered static. However, for transgender applicants, the gender listed in the policy does matter. Currently, there is no industry protocol for transgender and cisgender individuals. Some insurance companies will base a policy on your identified gender, and others on the gender you were assigned at birth. It's best to shop around to find an insurance company that will recognize you appropriately.

Take the next step

Now that you know more about how life insurance rates work, consider speaking with an experienced financial professional who will listen to your needs and dig deep to learn more about your situation. Then they can help you decide how much coverage is right for you and guide you through the options that best fit your needs at a rate you can afford. How do you find such an experienced professional? Ask a friend or colleague for a recommendation. Or, we can put you in touch with a Guardian representative

Frequently asked questions about life insurance rates

What is the average life insurance cost per month?

According to a recent survey of rates, the median cost for a 20-year term policy was 11.1¢ per $1,000 of coverage3. However, that number is an average life insurance cost for all applicants between the ages of 30 and 50. The actual price you'll pay will vary based on a range of factors, including the policy type, coverage amount, length of term, gender, health, and more.

How much is a 500k life insurance policy?

In 2021, the average monthly cost of life insurance for $500,000 of 20-year term coverage for a non-smoking male in good health is $28 at age 30; at age 40, it's $39; at age 50, $93. Women tend to live longer and enjoy lower insurance rates, so the cost is $22 at 30; $33 at age 40; and $71 at 50.3

Is life insurance worth getting?

If other people depend on you for support, life insurance is one of the most powerful tools available to help protect their financial well-being if you pass away. Consider: a 30-year-old woman with little or no savings could get $1,000,000 of term life insurance for $36 a month.3 If that woman passed away after her first year of coverage, she would have paid just $432 for the policy, but her family would receive a tax-free insurance payout of $1,000,000.

Permanent life insurance, such as a whole life policy, also includes a cash value component. A portion of your premium dollars can grow over time on a tax-deferred basis, so you don't pay taxes on the gains4. A policy's cash value provides additional benefits that you can use while you're still alive: you can borrow money against your policy's cash value, use it to pay your premiums, or even surrender it for cash in retirement.

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Disclaimer

References

1.https://www.limra.com/en/newsroom/news-releases/2020/2020-insurance-barometer-study-reveals-a-significant-decline-in-life-insurance-ownership-over-the-past-decade/

2. The Human Life Value method of estimating life insurance needs:

 Age

Maximum Life Insurance

18-40

30 times income

41-50

20 times income

51-60

15 times income

61-65

10 times income

66-70

1-time net worth

71-80

1/2 times net worth

81+

case by case

3. https://www.policygenius.com/life-insurance/life-insurance-cost/

1   SOURCE: https://www.policygenius.com/life-insurance/affordable-life-insurance/

2   Some whole life polices do not have cash values in the first two years of the policy and don’t pay a dividend until the policy’s third year. Talk to your financial representative and refer to your individual whole life policy illustration for more information.

3   Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59 ½, any taxable withdrawal may also be subject to a 10% federal tax penalty.

4   Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59 ½, any taxable withdrawal may also be subject to a 10% federal tax penalty.

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