Understanding The Cost Of Life Insurance

Learn what goes into pricing life insurance and how to get a low cost policy to protect your family.

Life insurance provides a financial safety net that you'll potentially be paying for some decades. That’s why it’s important to understand the cost of your policy. After all, letting a policy lapse because you can’t afford it defeats the purpose of having it in the first place.

A healthy 35-year-old male can expect to pay about $327 per year on life insurance premiums. But individual costs depend on a number of factors, including the details of your policy, your health, age, hobbies and gender — these are some of the criteria used by insurance providers to give you a classification that deems how risky you are to insure.

What are the chances that you’ll die over the course of your policy? If you’re very unhealthy and more likely to die during your policy term, you’ll be charged more. If you’re in tip-top health and there’s little risk that the life insurance company will have to pay the death benefit, then you’ll get better rates.

Knowing what goes into the cost of before you get life insurance quotes can help you make better decisions during the application process and find a policy that fits your budget.

  • Your policy
  • Your health
  • Your age
  • Your hobbies
  • Your gender

Your Policy

Coverage Amount and Term Length

How much life insurance you need is a two-part question: how much coverage you need (the death benefit), and how many years you need that coverage to last (the term). Both are important and affect the cost of life insurance. Policies with higher coverage amounts will cost more, as do policies that last longer.

Note that the policy length is only applicable to term life insurance. Permanent life insurance doesn’t have this limitation and costs more. More on this distinction below.

Type Of Life Insurance

The type of life insurance you have will largely affect the cost of the policy. A term life insurance policy is typically the most common and most affordable; a permanent policy is more expensive but has extra perks, like an investment-style cash component.

Term life insurance cost

With term insurance, you pay a monthly premium for a set amount of time. If you pass away while your policy is active or in-force, the insurance company will pay out a death benefit to your beneficiaries. A term life insurance policy is the right policy for most people. A healthy 30-year-old male can expect to pay an average cost of $26 a month for a 20-year policy with a $500,000 coverage amount.

Whole life insurance cost

While term insurance is typically affordable, whole life insurance has the potential to be pricey. Whole policies can be 6 to 10 times as expensive as a comparable term policy. This is because:

  • It lasts longer. A term life policy has an expiration date, but whole life policy doesn’t. As the name implies, it lasts your entire life as long as you pay the monthly premiums, and therefore it’s more likely that you’ll die while the policy is active.
  • There’s an additional cash-value component. Like other types of permanent life insurance, whole life has a cash-value component in addition to a life insurance component. Premium payments are split between these two sides, leading to higher rates.
  • There are more fees. Due to the above points, there are management fees associated with whole life insurance that are incorporated into premium rates.


Riders are like mini contracts appended to your life insurance policy that allow for customization for individual scenarios. They often come at an additional cost that will raise your premium and as such some riders might not be worth it.

Your Health

Your health status is one of the most important factors in determining your premiums. The healthier you are, the less likely you are to die, and thus cheaper to insure. During the underwriting process, you’ll have to answer some questions about your health and your family health history, and take a brief medical exam. The insurance company may also request an Attending Physician’s Statement (APS) from your doctor to get their assessment of your health as well.

Some things that might result in higher premiums include:

  • High blood pressure
  • High cholesterol
  • Hypoglycemia
  • HIV/AIDS and hepatitis
  • Recreational drugs including marijuana
  • Nicotine use
  • Chronic illness

If you use marijuana, your insurance company might also take that into consideration or even classify you as a smoker. However it's still possible to find providers to accommodate your lifestyle and health status whether you're a smoker, former smoker, or marijuana user so it's important to shop around.

Similarly, chronic illness or pre-existing conditions also tend to warrant higher premiums, but it's possible to find life insurance coverage with the right provider.

Your Age

In most cases, the older you are, the more you’ll pay for life insurance. This is because as you age, your health generally declines and your likelihood of dying while the policy is active increases. That’s why it’s best to get coverage while you’re healthy and young.

For a healthy male aged 30 years old, a 20-year term policy purchased has a $26 monthly premium, but the same policy at 40-years old would cost $37.

Your Hobbies

Some hobbies are more dangerous than others. If you skydive or scuba dive, your insurance company may deem you a higher risk and raise your rates since there’s a higher chance they’ll have to pay out the death benefit.

Your provider might also check out your driving history. A motor vehicle report will alert them to any risky drinking and driving-related behavior, like DUIs or DWIs, which will also increase your premium.

Your Gender

In most cases men pay higher premiums than women, due to the fact that they engage in riskier behaviors and have a shorter life expectancy on average. However applying for life insurance during pregnancy can raise your rates depending on the trimester. In most cases you’ll find that you can get a lower premium if you postpone buying life insurance until after you give birth.

Read more about buying life insurance when you’re pregnant.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.

This article originally appeared on Policygenius, a licensed insurance broker. Betterment is not an insurance broker and this article is not insurance advice nor an offer for particular insurance products or services.

The content was not written by an insurance agent, and it is intended for informational purposes only, and it should not be considered legal or financial advice.

Betterment makes no warranties or representations with respect to specific insurance offerings.