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Life insurance types

How much life insurance do you need?

You need enough life insurance to replace your income, pay off debts, cover funeral costs and leave enough money for your family’s future needs. Everyone’s financial needs are different, but here are some costs to consider:

  • Income replacement. Experts recommend you have at least five times your salary in life insurance. If you make $100,000 a year, start with at least $500,000 of life insurance.
  • Consider your family’s expenses. What expenses will your family have to pay if you are gone? Don’t just think about income, but also about childcare and other needs that would become expenses if a primary caregiver dies.
  • College tuition. The average annual cost of undergraduate tuition is $14,200 at a public institution and up to $28,100 at a private school each year.
  • Funeral expenses. The average cost of a funeral ranges from $6,000 to $8,000.

Once you figure out those costs, you’re able to get a better gauge of what your loved ones will need.

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Life insurance  cost

Life insurance costs vary by type of plan, your age, your gender, your health status, and many other factors, including any riders. Some of the costs you have no control over. However, quitting smoking and improving your health can lead to reduced rates. Take a look at average term life rates below.

Annual premiums for a $500,000 term life policy

AgeSmokerHealth10 yr term20 yr term30 yr term
30Non-SmokerExcellent$ 260$ 342$ 504
30Non-SmokerRegular$ 352$ 458$ 677
30SmokerRegular$ 766$ 1,025$ 1,598
40Non-SmokerExcellent$ 364$ 525$ 807
40Non-SmokerRegular$ 501$ 711$ 1,090
40SmokerRegular$ 1,260$ 1,899$ 2,911
50Non-SmokerExcellent$ 733$ 1,124$ 1,908
50Non-SmokerRegular$ 997$ 1,516$ 2,540
50SmokerRegular$ 2,650$ 4,171$ 6,604
60Non-SmokerExcellent$ 1,543$ 2,898N/A
60Non-SmokerRegular$ 2,041$ 3,798N/A
60SmokerRegular$ 5,856$ 9,433N/A
- Source: CompuLife Quotation System, 2023- N/A: Quotes not available
AgeSmokerHealth10 yr term20 yr term30 yr term
30Non-SmokerExcellent$ 313$ 412$ 624
30Non-SmokerRegular$ 430$ 554$ 865
30SmokerRegular$ 995$ 1,332$ 2,103
40Non-SmokerExcellent$ 431$ 634$ 1,027
40Non-SmokerRegular$ 603$ 871$ 1,413
40SmokerRegular$ 1,594$ 2,455$ 3,888
50Non-SmokerExcellent$ 921$ 1,474$ 2,591
50Non-SmokerRegular$ 1,286$ 1,979$ 3,430
50SmokerRegular$ 3,623$ 5,652$ 8,490
60Non-SmokerExcellent$ 2,214$ 4,095N/A
60Non-SmokerRegular$ 2,967$ 5,422N/A
60SmokerRegular$ 8,306$ 13,264N/A
- Source: CompuLife Quotation System, 2023- N/A: Quotes not available

Annual premiums for $1 million term life policy

AgeSmokerHealth10 yr term20 yr term30 yr term
- Source: CompuLife Quotation System, 2023- N/A: Quotes not available
AgeSmokerHealth10 yr term20 yr term30 yr term
- Source: CompuLife Quotation System, 2023- N/A: Quotes not available

Life insurance FAQs

How does life insurance work?

Life insurance pays a death benefit when you die. As long as you pay the premiums and die while the policy is in force, your beneficiary will pay the amount you choose.

What are the different types of permanent life insurance?

Permanent life insurance is available in several forms. Which type is best for you depends on what you want from your policy and how much flexibility you want. The four types of permanent life insurance are:

  • Whole life insurance is the most common type of permanent life. You get a guaranteed benefit, a consistent premium, and earnings on your cash value.
  • Universal life allows you to change your premium payments. You can increase or decrease premiums and the death benefit based on your changing needs.
  • Variable life lets you invest policy premiums and is riskier than other types of permanent life. Your death benefit is based on how your investments perform.
  • Variable universal life insurance is a combination of variable and universal life. You can vary payments, invest in premiums, and change coverage amount.

What is the difference between whole life and term life insurance?

Whole life is a type of permanent life insurance. You’re guaranteed a death benefit and the policies have a cash value. That allows you to tap into them if needed. Meanwhile, term life insurance is for a limited number of years, such as 20 or 30 years. Term life is usually more affordable than whole life. However, you may outlive your policy, and the insurer won’t have to pay a death benefit. You can usually convert your term life policy to permanent life as you near the end of the period.

What riders can you add to your term life insurance policy?

Riders are a way to get additional coverage on term life. Common types of riders are:

These add-ons can help you in ways beyond a death benefit. Riders add to the cost of your policy, but also add additional benefits.

How can you convert a term life policy to a permanent policy?

Many term life policies let you convert the entire term policy or a portion to permanent life. The insurer may allow this as you’re approaching the end of your term life. However, insurers also usually limit conversions to people before they turn 65. The later that you convert your term life, the likelier you’ll pay higher premiums, as your age is considered.

How can you find out if a life insurance policy exists?

Finding a loved one’s life insurance policy isn’t always easy. That’s why it’s critical for family members to communicate about policies while they’re still alive. You don’t have to tell your loved ones what they might receive. Just let them know where to find the policy. If you need to find a policy, there are a few avenues:

  • Contact other family members and the person’s lawyer, banker or accountant. 
  • Seek canceled checks and credit card statements to see if you can any written to a life insurance company.
  • Review probate court records.
  • Contact the person’s employer to see if they had a group life insurance plan.
  • Check with the state's insurance regulator.
  • If those actions don’t work, notify the MIB, which maintains a database of life, health and disability applications for seven years. Record searches can be requested through the MIB and cost $75.

What is return of premium life insurance?

Return of premium life insurance is a term life policy that gives you back your premiums if you outlive your policy. This coverage is much more expensive than regular term life insurance. However, it offers peace of mind that you’ll get back the money you paid.

What is instant approval term life insurance?

Some life insurance companies offer instant approval. These policies don’t require a medical exam. You might not even have to answer questions about your medical history. This coverage could be the only option for someone in poor health. Instant approval term life is more expensive and offers lower payouts than regular term life insurance. 

What is group life insurance?

Group life insurance is coverage you get through an employer or association. Employers may offer coverage for free or for a low premium. Group life insurance may not be enough coverage, and you may lose it when you change jobs. It’s a good idea to get your own permanent life or term life policy even if you have group life coverage.

What is accidental death and dismemberment insurance?

AD&D insurance pays you and beneficiaries if an accident caused your death or dismemberment. Many companies offer this coverage for free. You shouldn’t think of AD&D insurance as a replacement for life insurance. There are restrictions on when an insurer will pay out. Also, life insurance policies often offer an accidental death rider, which increases the death benefit if you die in an accident.

How do smoking and your health affect life insurance rates?

Smokers pay double or triple what nonsmokers pay for life insurance. Being in poor health also leads to higher premiums and may limit your life insurance options. See more about how smoking and health status affects rates below.

How do gender and age affect life insurance rates?

The older you are, the more you’ll likely pay for life insurance. This is especially true for term life insurance. If you’re 30 and take out a 20-year-old policy, you’ll pay much less than someone who’s 50. Gender also influences rates. Men usually pay higher rates because they typically don’t live as long as women.

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