What is a reasonable life insurance premium? What the experts say
Life insurance can often be a good way to financially protect your loved ones. By paying some money now, your beneficiaries can potentially receive a much larger benefit if you pass away while being a policyholder.
Like with health insurance, you pay a premium, i.e., a monthly or annual amount to obtain and maintain life insurance coverage. The potential benefit then depends on the type of policy and policy specifics.
With term life insurance, the policy will pay a death benefit if you pass away during the policy term. With whole life insurance, your policy will generally pay out whenever you ultimately pass away, though premiums are typically higher than for term life. Whole life also generally includes a cash benefit you can use during your lifetime that part of your premium goes toward, and it can grow over time.
But what's a reasonable life insurance premium to pay? The short answer is that it depends. So much can change based on the type of policy, the benefit amount, your health, age, etc.
Explore the top life insurance rates you may qualify for here.
What is a reasonable life insurance premium? What the experts say
"There are many factors that are involved, so there really is no way to say what is reasonable without having a specific person's background. The client's age, health, outside activities, overall life and lifestyle affect the rates. Each 25- or 45-year-old could have different rates at the same ages," says Michael Silverman, president and CEO of Silver Lining Insurance Agency.
That said, you can look at sample quotes to get a ballpark range of what you might pay for life insurance premiums and learn how different situations affect rates. Again, the specifics can vary significantly, but consider the following numbers provided by John Foard, certified financial planner, chief compliance officer and co-founder of Crown Advisors, LLC.
These quotes are for a 30-year term life insurance policy for a 35-year-old with a $500,000 death benefit and include living benefits, meaning some money could be paid out early, such as because of a terminal illness.
"Quotes for the same policy without living benefits will be slightly less," says Foard.
Find out more about the life insurance options available to you here.
Sample life insurance quotes
Sample policy quote: 30-year/$500,000 term life policy with living benefits for a 35-year-old male
- Preferred non-smoker: $56 per month
- Standard non-smoker: $80 per month
- Standard smoker: $193 per month
Sample policy quote: 30-year/$500,000 term life policy with living benefits for a 35-year-old female
- Preferred non-smoker: $47 per month
- Standard non-smoker: $63 per month
- Standard smoker: $150 per month
Women can generally expect to pay less than men when comparing comparable situations, and healthy non-smokers can expect to get the lowest rates.
To give you an example of how different ages and term lengths can affect reasonable premiums, consider the following numbers provided by Mike Raines, owner/agent at Raines Insurance Group:
Sample policy quotes: $500,000 term life policy for a male in excellent health, non-tobacco user
10-year term
- 30-year-old man with a 10-year term: $13 per month
- 45-year-old man with a 10-year term: $27 per month
20-year term
- 30-year-old man with a 20-year term: $19 per month
- 45-year-old man with a 20-year term: $43 per month
30-year term
- 30-year-old man with a 30-year term: $29 per month
- 45-year-old man with a 30-year term: $76 per month
Sample policy quotes: $500,000 term life policy for a female in excellent health, non-tobacco user
10-year term
- 30-year-old woman with a 10-year term: $11 per month
- 45-year-old woman with a 10-year term: $24 per month
20-year term
- 30-year-old woman with a 20-year term: $16 per month
- 45-year-old woman with a 20-year term: $36 per month
30-year term
- 30-year-old woman with a 30-year term: $25 per month
- 45-year-old woman with a 30-year term: $59 per month
Factors that can impact your life insurance rate
As the examples above show, costs vary significantly based on the length of the term and the policyholder's age.
When determining a reasonable life insurance premium for you, it can help to start by looking at quotes for similar policyholders but remember that rates can vary. If one friend pays $20 per month for coverage and another pays $100 per month, it doesn't mean one is being taken advantage of.
"So much can depend on how a person gets rated and much of it hinges on the medical records of the individual," says Foard. "Typically, the younger and healthier you are, the better rating you will receive, which translates to better and lower premiums."
Still, issues like family health history can affect your rates.
"So much goes into how an insurance company can and will rate an individual, so it pays to get quotes from multiple insurance companies," he says.
Raines advocates for speaking with an independent life insurance agent who can help you get quotes from multiple carriers.
"With an agent, you get their expertise and ability to navigate the underwriting process for free," he says.
With quotes from multiple companies, you can get a better idea of what a reasonable insurance premium is, rather than looking only at broad averages.
"The best way to make sure the quotes you are receiving are within an appropriate range for an acceptable premium — based on your age and overall health — is to work with an insurance agent or financial advisor that can provide you with quotes from multiple insurance companies," says Foard. "Most companies are going to be within a few dollars of each other."
It's possible, however, that there could be more significant differences. In addition to factors like differences in how insurers classify your health, look at any riders — which add benefits to your policy for an extra cost — that are included to get a better sense of why quotes may differ, says Silverman.
You can then choose a company based on factors beyond price, like reviews and financial ratings. Keep in mind that after you apply, you might end up with a different rate if you're given a different health rating than what was used for your quote.
"If, for some reason, the company comes back with an unfavorable offer, you can always apply at a different company to see what they would offer. If the rates they offer are very close, then you can feel pretty confident that due to your age, health and other factors that are considered you are getting offers that are pretty accurate," says Foard.
The bottom line
Ultimately, a reasonable life insurance premium is subjective, and if you're interested in getting coverage, you should see what your options are.
"When applying for life insurance, you are merely asking a company to make you an offer. If you do not like that offer, go somewhere else to test the market," says Foard.
