Table of Contents
Table of Contents
- People often overestimate the cost of life insurance — it's more affordable than you may think.
- You can typically get the best rates if you buy coverage when you're younger and more likely to be healthy.
- If you want to lower your premium, there are a few strategies you can try.
- There are options for coverage even if you have a pre-existing condition or are retired.
Life insurance is designed to help financially protect your loved ones after you pass. For many, searching for a policy may feel complicated and costly. However, there are more affordable life insurance policies out there to help meet a variety of budgets.
The key is understanding the factors that go into life insurance premiums and your needs. Doing so can help you determine the right coverage. Then, you can shop around for affordable life insurance rates for you and your family.
Here's some of what to know about lower cost life insurance and how to find it.
What Is the Average Cost of Life Insurance?
Life insurance is often more affordable than most people think. In fact, according to a 2023 study by the Life Insurance Marketing and Research Association (LIMRA), only 24% of people correctly estimate the cost of a term life insurance policy — while citing the price as one of the reasons why they don't purchase coverage. For example, in 2023, the average cost of a 20-year term life insurance policy for a healthy 30-year-old with $250,000 in coverage is under $200 a year — about $17 a month.1
Many people may be surprised that such protection comes for what may be less than the cost of their monthly streaming service subscription. That said, some options are more affordable than others.
What Is the Most Affordable Type of Life Insurance?
There are two main types of life insurance coverage: term life insurance and whole life insurance. Term coverage lasts for a set period of time, such as 20 years. It has a fixed premium, and provides your loved ones with a death benefit if you pass during that time period.
However, once the term ends, your coverage does too. If you pass one day after the expiration of your term policy and don't have additional coverage, the life insurance company won't pay any death benefits.
Term life insurance is typically more affordable than whole life insurance. There are several reasons why. First, term coverage is fixed; the policy is only for a set period — usually for the policy owners' most vulnerable years, such as when raising children or paying off a mortgage. In addition, term life insurance is relatively straightforward, with no savings or investing components. These factors help keep the premium down compared to permanent life insurance.
Whole life insurance covers your entire life, so your loved ones are guaranteed a death benefit. That's one of the biggest benefits of whole life insurance. This type of protection also has a few other features, like a cash value component. Management and administrative fees, plus the duration of coverage and fixed rates regardless of age and health, are some reasons why it's typically more expensive.
What Factors Determine How Much Life Insurance Costs?
There are many factors that affect the cost of life insurance. As part of the underwriting process, the insurance company will collect a variety of information about you and your family, ranging from your occupation to health, lifestyle, and hobbies.
All that data is compiled and reviewed by an underwriter who then estimates the likelihood of the policy owner making a claim and when that could occur. The higher the chance of that happening, the more expensive the premium.
For example, a 30-year-old healthy office worker who doesn't smoke and has no family history of significant illnesses is much more likely to pay a lower rate than a 30-year-old roofer who smokes and races motorcycles.
Here are the primary factors underwriters consider:
- Age: Generally, younger people pay lower premiums than older people. That's one reason why you may benefit buying coverage while younger.
- Gender: Due to different life expectancies, rates often differ between genders. Typically, women pay lower premiums than men because on average they live longer.2
- Health History: Your health plays a significant role in your premiums. All else being equal, the better your health, the lower your rates. If you have pre-existing conditions, are in poor health or have recently overcome a significant disease, that can also impact your rates.
- Occupation and Lifestyle: Life insurance rates are based on your risk of dying while covered. So, if you participate in more high-risk hobbies, have a riskier job or are a smoker or heavy drinker, that could increase your premiums.
- Family Medical History: Your insurer will also look at your family history to determine if there's a higher likelihood of hereditary diseases or medical issues. If so, that may raise your premium.
- Coverage Amount: Higher death benefits often lead to higher premiums. So expect to pay more for $500,000 in coverage than $250,000.
- Term Length: The same is true for the term length of coverage. Longer terms usually cost more. A 30-year term policy would cost more than a 10-year policy for the same coverage amount.
Added features, such as riders for extra protection, can also increase your premium costs. But these are optional.
How to Get Affordable Life Insurance
Many can find low-cost life insurance that fits their needs and budget. However, a few strategies can help you get the coverage needed at the price range that works best for you.
Consider a Term Life Insurance Policy
Term life insurance has many benefits. It's usually much more affordable than permanent policies. It's also designed to help provide financial security to loved ones who would be impacted by losing your income.
For example, choosing a term life policy is common if you have younger children or a mortgage. If you pass unexpectedly, your death benefit will help replace your income and cover childcare and educational expenses or the rest of your mortgage payments.
For many, the most affordable protection will be term life insurance. It helps safeguard your loved ones when they could be most financially vulnerable.
Try to Get Life Insurance Early
Younger and healthier people tend to get the best rates for life insurance coverage and even more affordable premiums for term policies. Locking in a term life insurance policy while young can be key in helping protect your loved ones financially without breaking your budget.
Maintain a Healthy Lifestyle
Your health will play a significant role in your premium. Assessing your health may be as simple as answering a few questions. Some life insurers may require a blood test. Others will ask you to take a medical exam in order to better understand your health. Not smoking and having a healthy lifestyle means you can typically expect lower rates than those who do.
If you're considering getting life insurance, try working on your health. Losing weight, quitting smoking, cutting down on drinking and lowering your blood pressure to the recommended level can all help you qualify for more affordable premiums. Some insurers may offer discounts or incentives for maintaining a healthy lifestyle or gym memberships.
Going forward, if you work on improving your health over time, you may be able to get new coverage with lower premiums.
Buy What You Can Afford
You may wonder how much coverage you need. The answer differs for everyone. Expect that your needs may change over time. But tools such as life insurance calculators can help you get a general idea based on your income, lifestyle and family needs.
To help keep coverage within your budget, get as much life insurance as you can comfortably afford. For example, you may have life insurance through your job that provides one to two times your salary. If needed, you can add supplemental coverage through an independent insurer to boost your death benefit.
Having some coverage a starting point is helpful. Then as your earnings increase or needs change, provided you are still insurable, you can buy more protection.
As with other types of insurance, such as auto and homeowners coverage, it helps to shop around with providers. You can run the numbers on multiple policies and compare quotes to see what fits your budget and needs.
Moreover, speak with insurers about potential discounts and other benefits. For instance, some may offer premium discounts to round up coverage. You may also get a deal by paying your premium in full each year instead of monthly. You may see a total discount on your premium if you can afford a larger payment once or twice a year.
During the life insurance application process, you'll have the option to purchase riders. You can add these features to your policy that provide extra benefits, such as disability coverage, early payment in the event of a terminal illness or policy conversions. Consider the importance of the added protections as riders can increase your premium.
How Much Life Insurance Coverage Is Enough?
Determining the right amount of life insurance coverage depends on various personal factors, ranging from your income to your dependents and debt. A good place to start the process is by asking, "How much life insurance do I need?"
Keep an open mind as you consider your options. What often works best is finding the right mix of enough to address your potential needs while still remaining within your budget.
- Your Age: If you're younger, your loved ones may face decades of potential lost income. If you're closer to retirement, you may only need to cover a specific financial goal, like paying off a mortgage.
- Your Income: Think about the amount needed to replace your income for a specific time — often until your dependents are financially independent.
- Your Debts and Expenses: When running your numbers, include your mortgage, car loans and credit card debt — your death benefit can help pay for those.
- Child Costs: You may want to help cover educational or childcare costs for your children, so factor those estimates into your coverage amount.
- Long-Term Financial Goals: Your overall retirement goals may play a role, including considering if you have enough savings to cover a surviving spouse's living expenses.
A general rule of thumb with life insurance is to take your income and get coverage for seven to 10 times that. While that may fit for some, it may not meet everyone's needs.
Frequently Asked Questions
Can I Get Affordable Life Insurance with a Pre-Existing Health Condition?
Having a pre-existing condition can impact your ability to get affordable life insurance. A pre-existing condition is an illness or medical issue you've had diagnosed before applying for coverage.
Pre-existing conditions can include:
- High blood pressure
- High cholesterol
To start, shop around at different insurers. Not all insurers have the same policies around pre-existing conditions, so some may have better rates for the same coverage.
You can also consider different types of life insurance. If your employer offers a group policy, you probably don't need to take a medical exam, which could be an affordable option to give you some coverage. No medical exam life insurance doesn't require a medical exam, but may offer lower coverage amounts and charge higher premiums.
Also, work on what you can control: your healthy habits and lifestyle. Even if you have a pre-existing condition, improving your general health may help lower rates. Some insurers allow for a reevaluation after a certain period to review your health and potentially reduce premiums.
Can I Change My Life Insurance Policy to Make It More Affordable?
With term life insurance coverage, your policy isn't set in stone. That's one of the most significant benefits of this type of policy: It offers some flexibility. As a result, there are some things you can do to help reduce your premium.
- Change Your Policy: If you currently have a whole life policy, consider switching to term coverage, which may be far less expensive.
- Reduce the Coverage Amount: Lowering the death benefit can help decrease your premiums. Ask your insurer to run the numbers.
- Adjust the Term Length: Term policies have adjustable lengths, often ranging from five to 30 years. If you have a longer-term policy, consider reducing the period to fit your needs better.
- Improve Your Health: One of the best ways to try and lower your life insurance premium is to improve your health. You may be able to renegotiate your premiums after quitting smoking or losing weight.
- Remove Riders: Check your policy to see if you opted for additional coverage or riders. Removing these can help lower your premiums.
Are There Discounts or Incentives to Make Life Insurance Cheaper?
You may be surprised to discover life insurance companies do have some discounts to help lower the cost of coverage. Asking your insurer about potential discounts while shopping around is important.
For example, your insurer may have healthy lifestyle discounts that offer lower rates for people who don't smoke, maintain a healthy weight, or have a gym membership. Some insurers may offer discounts for paying the annual premium upfront, loyalty savings or bundling options for adding car or homeowners insurance, discounting coverage.
If you belong to an alumni group or other membership organization, these groups may have negotiated with insurers to provide discounts on group coverage. Contact these groups to see if they have a preferred insurer or discount program.
Is Affordable Life Insurance Available for Seniors and Retirees?
You may not think you need life insurance in retirement, especially if your kids are out of the house and your mortgage is paid. Still, some people prefer coverage to help provide for a spouse, leave a legacy and pay off potential debts.
There are some life insurance options for seniors looking to keep their coverage or find a new policy. Here are a few to consider:
- Guaranteed Issue Life Insurance: This type of policy typically doesn't require a medical exam, so it can be a coverage option if you have pre-existing conditions. But it may have lower coverage amounts and higher premiums.
- Final Expense Life Insurance: This type of life insurance is generally more affordable and provides a smaller benefit amount (for example, $25,000) to help cover end-of-life expenses, such as funeral costs.
- Term Life Insurance: Term life insurance can be cost-effective if you're within the eligible age range. However, the age range varies with insurers, so check to determine the limits.
- Group Life Insurance: Some retiree organizations may have access to group coverage with affordable rates.
Find the Best Life Insurance Rates that Meet Your Needs
If you're ready to explore your life insurance options or want to find more affordable coverage that's better for your needs, consider speaking with a financial professional.
Your life insurance needs play a crucial role in your overall financial plans. An advisor can work through your needs and help you find a policy that will fit your budget while ensuring your family has some financial protection. Knowing they're covered, especially during a stressful time, is one of the best gifts you can leave your loved ones.
- LIMRA's 2023 Insurance Barometer Study. https://www.limra.com/en/research/research-abstracts-public/2023/2023-insurance-barometer-study/.
- Mortality in the United States, 2020. https://www.cdc.gov/nchs/products/databriefs/db427.htm.