The Average Price of Life Insurance
Life insurance is a financial product that protects your family from your debts. How much this protection will cost you depends on a variety of factors. Insurance companies use a process, called "underwriting" to determine what your cost, called a "premium,, will be. The underwriting process examines several major risk factors.
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Types
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There are two types of life insurance: term life and permanent life insurance. Term life insurance always starts out initially as the lowest cost form of life insurance. This type of insurance is purchased for a set period of time. When the term is up, your policy expires and will not pay a benefit. Permanent life insurance stays in force for your whole life if you pay the required premium payments. This type of insurance might also build a cash reserve, called a cash value, that acts like a savings you can use at any time. Permanent life insurance always starts out as being more expensive. Over time, term life insurance becomes more expensive than permanent life insurance, while permanent life insurance costs decline, making it less expensive. The premiums, on average, for permanent life insurance may be five to 10 times what term life insurance premiums are assuming the same death benefit and with all other risk factors being equal.
Age
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Your age determines your policy premiums. The older you are, the more expensive your policy will be. This is why it's more advantageous to purchase a policy when you are young rather than waiting until you're older. The cost of a term life insurance policy that is purchased at your age 70, for example, may be 20 or 30 times as expensive as the same policy purchased at your age 35. The exact increase depends on the company, however, as well as the company's reserves and reinsurance (how much insurance they purchase from other insurance companies to cover exceptional risks like insuring older individuals).
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Health & Lifestyle
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Health and lifestyle play a major role in your insurance costs. If you smoke, drink excessively, have a poor driving record or have any health problems then your premiums are likely to be more expensive. The healthier and less risky your lifestyle is, the cheaper your premiums. For example, as a smoker, you may pay up to $100 more in premiums for your life insurance assuming all other risk factors would have placed you as a standard risk.
Occupation
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Your occupation can make a difference in what the insurer charges for your insurance. If you work as a pilot, for example, you may expect to pay more in premiums than if you work in an office. This is because pilots represent a greater risk to the insurer. The exact increase in your premiums will vary according to how the insurer prices aviation risk.
Gender
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Whether you are a male or female matters. Females, statistically, live longer than men, with all other risk factors remaining the same. For this reason, women enjoy lower premiums than men over the course of their lives. The discrepancy in premiums is more pronounced later on in life (i.e., after age 60). Premiums for men over 60 may be up to twice as much when compared to a female's premiums, assuming all other risk factors are equal.
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