Are you planning to buy a new insurance policy? Then you must know how these insurance coverages work to provide you with financial security. Buying a policy is a notable investment, for sure. So, you should choose it wisely.
But how much is an insurance policy? Well, the amount of premium varies depending on the insurance category, term length, policyholder’s age, health condition, lifestyle, occupation, gender, etc.
But, wait! Don’t get confused. We are here to help you find out the right coverage with optimum benefit. So, without further ado, let’s dive a bit deeper into it.
How Much Is An Insurance Policy? (Explained)
On average, if you are a healthy person aged between 25 and 30 years, you may need to pay a premium of $20 to $30 per month for a term life insurance of 20 years and may get coverage of $50000. Whereas with the same coverage, the premium amount for whole life insurance or universal insurance may cost $100-$150 and $50-$100 respectively.
However, this amount can range from a few dollars to hundreds of dollars per month, depending on the individual’s specific circumstances. So, take a tour below to learn how insurance costs can vary based on some specific factors.
Factors That Affect The Cost Of Insurance
The insurance agent or company considers the following things before setting your insurance premium cost:
Age:
The younger you are, the less you need to pay for your premium as young people are considered to have a lower death risk. So buying a policy at an early age is wise to keep the rate low.
Health Condition:
If you are healthy as per the physician’s endorsement, you have got the chance to pay less premium than an individual with poor health. They will take you for any pre-existing conditions including blood pressure and cholesterol levels, height, and weight.
Coverage Amount:
What you get back at the end of the policy or the amount your family gets at your unexpected death means the coverage amount. And this amount will determine your premium. Remember, if your coverage is higher, you need to pay a higher amount for the premium.
Term Length:
If the term of the policy is higher, you need to pay more as a premium. Because the insurance company probably has to pay you the death benefit in that case which adds some extra cost to your premium.
Occupation:
To be straightforward, your occupation is vital. Hazardous jobs like firefighters and sensitive like police officers or such type of jobholders need to pay more premiums. Because unexpected death risk is high for these groups.
Smoking:
As smoking increases the death risk or health hazards, typically, smokers need to pay higher premiums than non-smokers.
Lifestyle:
Your insurance company will go through your lifestyle to fix your rate for the premium. A risky or irregular lifestyle may cost a higher premium cost.
Location:
The cost of insurance varies based on your location or region too. Basically, it differs from region to region.
Gender:
Normally speaking, women have longer life expectancies compared to men. Therefore, insurance companies ask for lower premiums for women in the same situation for both.
Policy Type:
The policy category like the term, whole life, or universal life which one you wish to pursue is a determinant to fix your cost of insurance.
Family Medical History:
An insurer will take information about your family’s medical history. It includes the history of family members’ serious health issues such as heart disease, cancer, or any chronic disease.
Driving Record:
Moreover, your driving records matter to fixing the premium amount by the insurer. If you have any bad record in your driving history, it costs higher as it counts as high-risk life insurance.
Types Of Life Insurance
All over the world, we mainly see three types of life insurance. They are-
Term Life Insurance:
Term life insurance is an insurance type that gives you coverage for a particular term, like 10, 20, or 30 years. It has a comparatively lower premium than other insurances.
The cost of it mainly depends on the policyholder’s age, health, coverage amount, and length of the term. Also, the cost can get high due to policy holder’s age and other comprehensive coverage.
Whole Life Insurance:
Whole life is also called permanent life insurance. It gives coverage for the policyholder’s entire life with a condition that you need to pay the premiums throughout your life.
In this case, the premium amount is higher than term insurance because of the period. Besides providing death benefit protection, whole life insurance allows you the privileges of a savings component that creates cash value accumulation over time.
The amount of premium cost depends on the policyholder’s age, health, coverage amount, and other policy attributes.
Universal Life Insurance:
Finally, universal life insurance provides both death benefit protection and savings components. It is a flexible premium and death benefit that allows the policyholder to adjust coverage as needed.
The savings component has the tax-deferred privilege and you may invest in various options, such as bonds or stocks.
Similar to other policies, the cost will increase if the policyholder’s age increases.
Coverage And Cost Of Premium: Comparison Of Different Insurance Types
Based on the policy type, the rate of premium varies. The same person with the same health condition needs to pay different premiums according to the insurance coverage he chooses. The table below shows it in detail:
| Category | Term | Permanent | Universal |
| On average for a 30-year healthy person’s premium rate for coverage of $50000 | For a 20 years term insurance, 20$ to 30$ per month | $100 to $150 per month for coverage of $500,000 | On average, a healthy 30-year-old can expect to pay around $50 to $100 per month for a $500,000 universal life insurance policy. |
The average cost of term life insurance will vary according to age and health. You can get an idea from the table below
| Age and Gender | Highly Desirable | Desirable | Regular |
| Man, 30 | $224 | $284 | $410 |
| Man, 40 | $335 | $418 | $651 |
| Man, 50 | $829 | $981 | $1,523 |
| Man, 60 | $2,361 | $2,669 | $4,257 |
| Man, 70 | $9,297 | $10,934 | $14,862 |
| Woman, 30 | $189 | $224 | $340 |
| Woman, 40 | $283 | $348 | $507 |
| Woman, 50 | $645 | $764 | $1,150 |
| Woman, 60 | $1,666 | $1,899 | $3,049 |
| Woman, 70 | $8,204 | $8,662 | $10,574 |
Source: Quotacy
The Average Cost Of Life Insurances Based On Term Length:
Here provided that the coverage amount is $500,000 in a term life policy where the policyholder is 40 years old.
| Term Length Policy | Annual Cost For Men | Annual Cost For Women |
| 10 years | $206 | $180 |
| 20 years | $335 | $283 |
| 30 years | $584 | $464 |
Source: Quotacy
Cost Of Whole Life Or Permanent Life Insurance Based On Age And Gender
If the coverage amount is $500,000, the cost will be like the following chart-
| Age | The average annual cost for men | The average annual cost for women |
| 30 | $4,652 | $4,015 |
| 40 | $7,028 | $5,937 |
| 50 | $11,163 | $9,443 |
| 60 | $19,150 | $15,943 |
| 70 | $30,462 | $27,398 |
Source: Quotacy
Why Is Life Insurance Important?
There are some worthy benefits of Life Insurance and they are as follows:
Firstly, it is very strong financial protection for your family. It will give you a mental piece to know that after your unexpected death, your loved ones are somehow financially secure. It helps to manage your funeral cost, mortgage payment, and living expenses too.
However, it is a saving mechanism. Because we know some policies accumulate cash over the course of time that can be used as borrowing instruments. You can take tax-free loans against the cash value of the policy. It also helps to settle estate taxes.
On top of that, the death benefit is commonly tax-free. Some Life insurance is considered a part of Retirement planning as it gives you guaranteed income such as annuities, cash value accumulation, and tax-deferred growth.
Things To Consider To Buy Insurance
While buying insurance, you need to consider some factors to suit the policy with your objective.
Most importantly, you should have a clear understanding of when to purchase which type of insurance. However, the following factors should be looked up to when you decide to have an insurance policy-
- Choose a policy that you can afford
- Evaluate the future of the policy
- Compare several policies from different companies
- Know what the policy doesn’t cover
- Choose a policy that covers your basic needs
- Always look for discounts
- Tell the insurance agents nothing but the truth about your financial condition
When To Buy A Term Life Insurance
If you wish to cover yourself for a specific period, a term life policy is suitable. If you die in the term, this insurance can replace your income and your major financial obligations will be met up by this insurance.
However, if you want the most affordable coverage, go for term life insurance as it is the least expensive.
Also, if you do not wish to use your insurance as an investment instrument, a term life policy is better.
When To Buy Whole-Life Insurance
If you are able to comfortably afford the higher premiums, you may go for whole-life insurance.
Plus, if you wish to save money for your heirs, the death benefit you get from your whole life policies is a potential source for your inheritance. Besides, it is a wise selection to develop a guaranteed cash value.
And please note that the rate of premiums of every policy is typically set from the very beginning.
Conclusion
In final thoughts, we can mention that life insurance is always an important decision whenever you are looking to secure your family’s financial future. It’s a kind of financial protection for your dear ones.
To purchase a very suitable one for you, you need to understand the different types of policies and their benefits at the end of it.
Furthermore, please consider the financial parameters, benefits, privileges, and above all, how much is an insurance policy.
As stated above, the cost of insurance varies due to age, health, coverage amount, and type of policy. Therefore, it is wise to consult a professional to find out the best suitable policy for your unique situation and object.
Mehedi Hasan is an insurance expert with over 6 years of experience in the industry. He has a deep understanding of various types of insurance policies and is skilled at helping clients find the coverage that best fits their needs. In his current role, Mehedi works as a consultant, advising businesses and individuals on the best insurance options for their specific situations.
He is also a frequent speaker at industry events, sharing his knowledge and expertise with colleagues and professionals in the field. Mehedi holds a degree in insurance and risk management and is committed to staying up-to-date on the latest industry trends and developments. In his free time, he enjoys reading, traveling, and spending time with his family.