What Affects Life Insurance Rates?

If your question is what affects life insurance rates, the answer is, “not very much.”  Life insurance rates are based on multiple millions of lives and death rates are predictable.  A dramatic change in the financial markets could affect life insurance rates if the companies cannot earn the necessary returns to maintain their promises.  A dramatic epidemic could affect rates.  Recently rates were affected by regulation.  These changes are generally small.

How much is life insurance?

The average cost of life insurance is $26 a month. This is based on data provided by Quotacy for a 40-year-old buying a 20-year term life policy, which is the most common term length sold. But life insurance rates can vary dramatically among applicants, insurers and policy types.

How life insurance rates are determined

Life insurance premiums are based primarily on life expectancy, so many factors help determine rates, including gender, age, health and whether you smoke.

In general, the healthier you are, the cheaper your premiums. Insurers typically class applicants using terms like super preferred, preferred and standard, with super preferred being the healthiest category. Insurers then calculate premiums based on your risk class.

The type of life insurance you choose also affects your rates:

  • Term life insurance is the least expensive because it lasts a set number of years and all you’re getting is insurance. 
  • Permanent life insurance lasts a lifetime and includes an investment portion that can be used later in life. Because of this extra cash component, you’ll pay substantially more for permanent policies than for term life policies.

» MORE: How To Choose Between Term Vs Whole Life Insurance

What Affects Life Insurance Rates?

10 things that affect life insurance rates are:
1) Age
2) Gender
3) Tobacco use
4) Build
5) Health
6) Dangerous hobbies
7) Being a pilot
8) Type of policy chosen
9) The company through which the policy is purchased
10) Rates in the industry at that time

As a rule, the older the age the policy insures you to, the higher the rates.

Average cost of life insurance by age and gender

These annual life insurance rates are based on a $500,000, 20-year term life insurance policy for super preferred applicants.

AgeAverage annual rate for menAverage annual rate for women
30$227$193
40$341$289
50$842$654

Average cost of life insurance by policy type

These annual life insurance rates are based on a $500,000 policy for super preferred applicants.

 20-year term lifeWhole life
AgeAverage annual rate for menAverage annual rate for womenAverage annual rate for menAverage annual rate for women
30$227$193$4,015$3,558
40$341$289$6,042$5,413
50$842$654$9,432$8,440

Average cost of life insurance by health

These annual life insurance rates are based on a $500,000, 20-year term life policy.

Age and genderSuper preferredPreferredStandard
Woman, 30$193$233$354
Woman, 40$288$354$521
Woman, 50$654$774$1,156
Man, 30$228$294$421
Man, 40$341$421$668
Man, 50$842$991$1,562

Average cost of life insurance by term length

These annual life insurance rates are based on a $500,000 term life policy for a 40-year-old applicant in the super preferred class.

Term lengthAverage annual rate for menAverage annual rate for women
10 years$211$185
20 years$341$289
30 years$595$478

Average life insurance rates by age were calculated based on quotes from five of the largest insurers: John Hancock, MassMutual, New York Life, Securian and Transamerica. Costs shown are for a man in excellent health. Additionally, gender life insurance rate charts used the same insurers and included applicants in excellent health.

Data from this study showing the cost by policy term length was sourced from Northwestern Mutual Life Insurance. Life insurance figures were calculated by looking at four policy amounts ($100k, $250k, $500k, and $1 million) across four rate classes. Below is the breakdown of each rate class:

Preferred plus policies assume no tobacco use in five years, no serious medical issues, cholesterol levels below 200 and blood pressure that doesn’t exceed 130/80.

Preferred policies assume no tobacco use in three years, above-average health, no serious medical issues, cholesterol levels below 240 and blood pressure that doesn’t exceed 135/85.

Select policies assume no tobacco use in 12 months, good health, blood pressure below 140/90 and cholesterol levels below 300.

Standard policies assume tobacco use in the past year, good health, cholesterol below 300 and blood pressure readings below 140/90.

Read Next: What Is The Average Cost Of Life Insurance Monthly?

Add a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.