The Cost of Life Insurance

About 60 percent of Americans were covered by some type of life insurance in 2018, according to the Insurance Information Institute. The American Council of Life Insurers estimated individual life insurance protection totaled $12.1 trillion by the end of 2018.

If you are young and healthy, you can get a term life insurance policy for around $20 per month. Your premium will increase depending on your age and sex as well as the term and death benefit of the policy you choose.

For example, the average monthly premium for a 25-year-old man buying a $500,000, 20-year term life policy in 2021 is $37. A 25-year-old woman buying the same policy would pay $31 a month, on average, according to Senior Market Sales, a full-service insurance marketing organization based in Nebraska.

If you wait until age 45 to buy that same policy, the average monthly premium would increase to $95 for men and $75 for women.

Insurance rates rise quickly as you age — up as much as 10 percent every year you wait. Your health and other risk factors can also increase your premiums.

Mortality, interest and expenses are the three factors that determine life insurance costs, according to the New York Department of Financial Services.

In addition, the type of policy and amount of coverage you choose will affect the cost of your premium. Other factors that can affect your insurance costs include how dangerous your occupation is, any pre-existing medical conditions you may have and your immediate family’s medical history.

Age and sex both drive the cost of life insurance. Men typically have to pay higher premiums than women because women overall have a longer life expectancy.

The older you are, the more insurance premiums will cost you. You can expect to pay 8 percent to 10 percent more each year the longer you wait to buy life insurance, according to AIG Direct. It jumps to 9 percent to 12 percent more a year once you hit 50.

Using the average of those figures, a healthy 35-year-old man might buy a 20-year term policy at a cost of $500 per year. A healthy 50-year-old man would pay $1,175 a year for the same policy because he waited an additional 15 years to buy it.

Someone who waited until they were 65 would pay $3,025 for the same policy.

There are several ways to lower your monthly life insurance policy. They may require that you act quickly to purchase a policy or change your lifestyle to improve your chances of living longer.

Participating in extreme sports may also cause you to pay higher premiums, and some insurers won’t even sell policies to people who take part in them. Still, other insurers will sell you a policy that will not pay out if your death results from an extreme sport or what insurers call a hazardous avocation.

Generally, if you take up a hazardous avocation after the contestability period on your policy expires — usually one to two years after you buy it — your death would be covered if you die from the activity.