Life Insurance

Understanding the Cost of Life Insurance

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A good life insurance policy may provide more than it costs, but the nuances are complicated. Health risks are perhaps the biggest factor determining life insurance rates. Like all forms of insurance, life insurance is designed to manage risk. To do this, insurers calculate risks based on what's insured.

For life insurance, this means determining health risks that could impact your life expectancy. While it's not the most comfortable topic to consider and discuss, it's what life insurance tackles. For that reason, the healthier and younger the applicant, the lower their cost of life insurance tends to be. 

However, rates for life insurance are affected by the kind of policy in question and the coverage amount of that policy.

Average cost of life insurance plans

The average life insurance cost varies based on demographics and policy types. However, there are some consistent trends in pricing. For example, life insurance rates usually increase with the applicant's age. For this reason, policies with fixed rates are often sought after by younger applicants seeking to secure and lock in low rates. Term policies can offer fixed rates at relatively low price points compared to other types of life insurance.

For a ten-year term life plan with a $1,000,000 payout, the average monthly cost for non-smokers is $58 at age 25, $65 at age 35, $135 at age 45, $316 at age 55, and $790 at age 65. This progression of rate average by age helps to highlight why many individuals choose to secure term plans while they're still young. For smokers, these averages rise significantly. In many cases, they're more than double non-smoker rates.

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Calculating life insurance costs

Although companies tend to keep their proprietary rating systems private, many offer free online quotes. Life insurance calculator cost estimates are some of the fastest and easiest ways to get a sense of your potential life insurance policy rates. Since the estimates are based on incomplete data, the rates may differ from the finalized costs. Still, these numbers are generally close and provide some of the most effective ways for applicants to see their expected rate level. 

If you're wondering if now is a good time to buy life insurance, consider that term life insurance is more affordable than ever for many people. In fact, according to the Insurance Information Institute (iii), half of the American population expects term life insurance policies to cost at least threefold what they'd be charged. This disparity in perception is another reason to utilize free online estimates. While estimates aren't perfect, they're often close to the mark.

Types of life insurance

Each life insurance policy type is specialized for a specific use. The simplest and most traditional type of life insurance is term life. These policies are preset for a set period of time, known as the policy term. After that term is up, these policies must be renewed or replaced if you want to continue having life insurance. When people speak of traditional or average life insurance policies, they often refer to term plans.

The alternative to a term plan is a permanent life insurance policy. These policies last for the duration of your life, so long as the premiums are paid. Whole life insurance is one of the more common types of permanent life insurance. These policies generally have fixed rates and include an investment portion with a cash value that the policyholder can utilize during their life. Due partly to their investment features, permanent life insurance policies often cost more than term plans.

Buying life insurance

While you shop, it's worth keeping in mind some of our tips for buying life insurance. First, be intentional about your timing. The best time to buy life insurance will depend on your circumstances. However, your age and other factors can influence when life insurance is most affordable. 

Second, take your finances into account. Life insurance can be a hedge against risk, but only when it fits within your budget (this is a great time for using a coverage calculator). Third, consider which type of life insurance may be best for you. 

Ethos works by focusing on term and whole life policies. Most applicants can apply without needing a medical exam, although some health questions are still involved. You can usually complete the online life insurance application process entirely from home. 

If you're considering term or whole life insurance, get a free quote through Ethos today and discover what your life insurance price could be.

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10 years
Please note that all prices quoted are subject to change, including due to underwriting.