Life Insurance Pricing Explanation: Complete 2023 Guide

Last Updated June 12, 2024
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There are hundreds of life insurance companies to choose from when shopping around for a policy. You may wonder, “What is a good price for life insurance?” Many companies will not offer an online quote, opting instead for you to call a live agent so they can convince you to buy their insurance products. How do you know if you are getting the best insurance rate? There are a number of factors that affect the cost of life insurance. Life insurance policy rates are determined by factors such as your age, gender, the size of the policy, and the length of the policy. We will review everything you need to know about what premiums are, average life insurance rates, and what you can expect from your policy.

Insurance Premiums Explained

When shopping around for any type of insurance one term you should know that will frequently come up is “premium”. Car insurance, homeowner’s insurance, renter’s insurance, and life insurance all have premiums that the insured will have to pay on a scheduled basis.  Premiums establish the cost of life insurance to you on a scheduled basis.

What Are Insurance Premiums and How Do They Work?

      Life insurance premiums are the amount the insured agrees to pay when they sign their life insurance contract. The cost of life insurance can be paid monthly, annually, or semi-annually depending on the insurance carrier. A premium is the exchange of money you give in order to guarantee yourself protection in the event of death or disabling injury. 

     Regardless of the type of life insurance plan; your premium payments are necessary in order to keep an active insurance policy. Like with most services that require a recurring payment, your plan may be terminated should you default on your payments without giving proper notice or discussing your options with an agent. Insurance companies collect these premiums in order to have liquid assets. A liquid asset is an asset that easily is turned into cash in a short period of time. Insurance companies use liquid assets in order to provide compensation to policyholders in the event of a claim. It allows them to offset some of the cost by providing coverage to people while still keeping their prices competitive for the market. This also explains why whole life insurance can be so expensive. Permanent life insurance costs have far more factors to consider when trying to give out liquid assets.

Is Lowering Insurance Premiums Possible?

     In a previous article, we discussed if insurance rates are negotiable. In short, insurance premiums can be depending on the type of insurance you are looking for and what conditions are met. There are a number of ways you can lower the cost of life insurance premiums which will lower your life insurance cost as a whole. The biggest factor that will be measured by insurance companies is your overall health. Improving your health by losing weight, quitting smoking, and preparing for a medical exam can greatly improve whether or not you qualify for a lower premium.

Life Insurance Costs and How They Are Determined

     There are a number of factors that go into how much life insurance costs. Each factor can impact how much your future premiums may be. The following are the factors insurance companies consider when determining how much you will pay in premiums:

 

  • Age
  • Gender
  • Health
  • Coverage Amount

How Much is an Average Life Insurance Policy?

     It can be difficult to determine a proper average cost for life insurance. Everything from your health to the type of policy you get will change how much you pay in premiums. For example, term life insurance is far less expensive compared to standard whole life insurance.  This is because whole life insurance, or permanent life insurance, has a cash value component to them which acts as a tax-free investment account. It also lasts for a considerable amount of time since whole life insurance lasts until you pass away. Term life insurance is temporary and only lasts for a set number of years. 

Average Life Insurance Rates by Age

     The standard rule for life insurance is that the younger you are when you enact a policy, the cheaper your premium rates will be. That is because seniors are considered higher risk applicants due to health issues that can occur as one gets older. With that being said, however, policies will never increase as you age. If you have a whole life insurance policy starting when you are 40 years old it will stay the same as you get older. Below we have an example of some of our insurance carriers and how rates differ by age. For this example we will focus on the carrier, Americo Insurance

Insurance Rates By Age

Age (Male) Premium for 10k Face Amount
40
$33.62
50
$39.97
60
$52.16
70
$86.49
80
$172.93

Average Life Insurance Rates by Gender

     Similar to car insurance, women tend to have lower premium rates than men due to the fact that women typically live longer than men. Not only do they live longer but statistically women take fewer risks than men. Risky behaviors, lifestyle choices, and longevity are all factors that underwriters consider when discussing premium rates for the cost of life insurance. This all factors into why women typically have lower insurance premiums than men. Below is a chart of men and women, all non-smokers, and a comparison of their insurance rates. You can see that women tend to have better rates overall. Below you can see the different carrier rates by gender. 

Insurance Rates By Gender

Gender Americo Insurance Rate AIG Insurance Rate Mutual of Omaha
Male
$52.16
$47.82
$43.76
Female
$41.34
$35.83
$32.87

Average Life Insurance Rates by Health

     It goes without saying that the healthier you are, the cheaper your premium amounts will be. Especially if you have no pre-existing conditions like diabetes and live a healthy and active lifestyle. Insurance companies will ask you a series of medical questions when you submit your application and some will have you submit to a medical examination. These questions are designed to deny those who pose too much of a risk to underwriters and determine which coverage plan is acceptable for the applicant. 

     Some applications ask about your family history of health issues. That is because many health conditions have a strong family link like breast cancer, heart disease, and high blood pressure. If your parents have a history of cancer then the underwriters may factor that into the cost of insurance on your policy. They take this into account because there is a strong link to you having a similar disease or issue in the future. The chart below demonstrates that by looking at rates of smokers vs non-smokers. 

Insurance Rates Smoker vs Non-smoker (Of Men)

Insurance Carrier Smoker Premium Non-Smoker Premium
Mutual of Omaha
$59.64
$43.76
AIG Insurance
$65.28
$47.82
CVS Health
$66.15
$51.10

Average Life Insurance Rates by Coverage

     Coverage types vary by insurance carrier and your own individual needs. Depending on how much of a face amount you want and how many riders you have on your policy it could drive the cost of life insurance up or down. Riders are additional options for your policy that grant you different aspects of coverage depending on your needs. For example, a term conversion rider will allow you to convert your expiring term life insurance into a permanent life insurance policy.   Customizing your coverage means you control how much you wish to pay and when. Obviously, if you want a policy with a face amount of $1,000,000 it will cost far more than a policy worth $100,000. Below is a chart demonstrating sample rates of a 40-year-old man looking for different coverage amounts and how much that would cost him monthly. 

Term Life Insurance Rates by Coverage Amount

Face Amount Term Length Premium
$100,000
10 years
$8.48
$250,000
10 year
$11.64
$500,000
10 year
$16.86
$750,000
10 year
$22.17
$1,000,000
10 year
$26.18

Other Factors Regarding the Cost of Life Insurance

      Aside from the above-named reasons, there are other factors that go into the cost of life insurance. Underwriters are interested in what kind of risk you pose to the insurance company and are more likely to insure you if you pose a low risk to them. The following are factors that they consider when calculating your life insurance cost. 

Arrests and Driving Record

     Being arrested and having a poor driving record will increase the cost of life insurance for you or could even get you denied life insurance. This is because these dangerous behaviors can be very costly to insurance companies and they would rather not deal with an avoidable loss. Major traffic violations and having DUIs on record will be a great cause of concern for insurance companies. If you are not denied right away, they will charge you very expensive rates in order to get a fair return on their investment. 

Occupation and Lifestyle

     People who enjoy walks on the beach and curling up with a good book are preferred to insurance companies over folks who like to skydive and rock climb. That is because dangerous activities or leading a more “exciting” lifestyle can ring alarm bells for underwriters. A more dangerous career path could also lead to an increase in the cost of life insurance. Pilots and police officers have a harder time getting a life insurance policy that is not through their employer than a librarian or coding expert. That is because these high-risk careers pose more threats to the individual’s well-being. Underwriters take that into consideration when adjusting premium rates for life insurance costs.

How To Find the Best Rates for You

     At Final Expense Benefits, we work with you to find the perfect policy that fits your every need. We partner with over 20 carriers with customer satisfaction guaranteed. They offer no medical exam options at much more affordable rates that fit your needs. Regardless of any chronic or pre existing conditions, we can find the best coverage options for you.  Some of our highly-rated carriers include:

     If you are looking for trusted and affordable final expense insurance, the experts at Final Expense Benefits have got you covered. Call one of our talented agents today at 1 (866) 311-4338 to get an affordable quote with one of our highly-rated insurance carriers. 

Frequently Asked Questions

Term insurance plans cover you for a set duration of time. Typically these policies span from 10 – 20 years. These policies are often the most affordable and have lower monthly premiums. You can renew policies if the term is up but you still need life insurance.

Unlike term, whole life insurance is a type of policy that lasts for as long as you pay the premiums. Usually, the policy has a clause to end if you live over 100 years old. Whole life insurance also has a cash value that grows over the lifetime of the policy. 

Universal life insurance is a type of permanent life insurance where a portion of your premium covers the insurance cost and the other portion accumulates interest. It allows you flexible payment options and to adjust your face amount. 

Final expense insurance, also known as burial insurance or funeral insurance, is a type of life insurance policy that specifically assists with end-of-life expenses. From funeral services to final medical bills, these fixed-rate policies last as long as the insured lives.

You can choose to go with term life insurance, a final expense insurance plan, or change your lifestyle so that you can lower your monthly payments. 

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