Average Cost of Life Insurance (2016)

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Average Cost of Life Insurance (2016) insurance

ValuePenguin recently took an in-depth look at the average cost of life insurance across a number of different policy durations. The largest influencing factor on life insurance prices are the health of the individual being insured. Factors such as whether or not your smoke, and what your height/weight are go a long way towards determining your annual insurance premiums. Individuals that smoke can pay 3-4x the amount that healthier, non-smokers will have to pay in premiums. Of course, life insurers will look at many other factors besides health (such as your occupation and age) but factors common in pricing other insurance products, like state of residence, won’t be a contributing factor.

Looking at a 20 year term policy (the most popular option) worth $250,000, we’ve determined what the average annual price is for individuals between 25 and 65. One of the clear takeaways from the table: it’s expensive to smoke! Smokers on average will pay up to 200% more for their life insurance policies than non-smokers. This disparity grows with age with 25 year old smokers paying twice as much for their insurance while 65 year old smokers pay almost 3x as much.

Below you’ll find the average cost of life insurance broken out by number of years on the policy. Unsurprisingly so, the longer the policy term the more expensive it is. Average policy costs range from $568 per year for a 10 year term policy to $1,528 for a 30 year term policy.

Average Cost of Life Insurance (2016) insurance

Term life insurance rates are typically the cheapest way for an individual to purchase life insurance coverage. They’re significantly cheaper than insuring with a whole life policy and still provide some flexibility. Our charts below detail 10, 20, and 30 year term life policies so you can see the average cost of each. As you’ll see, fewer policy coverage years equate to a cheaper monthly (or annual) premium. 

Here we breakdown 10 year term life insurance policies and show you the average annual premiums depending on your level of health and the amount of coverage you’re interested in purchasing. Ten year policies are popular for those people who are on a very tight budget as they offer some of the cheapest rates on the market, or those who won’t require insurance after their ten years of coverage expires. If you need a reminder on what each ‘Rate Class’ entails you can click here and see our description at the bottom of the page. 

Average Cost of Life Insurance (2016) insurance

The most popular term life insurance option on the market, the 20 year term policy provides longer coverage than its shorter-term 10 year counterpart. These policies are usually recommended for young families who often have large debts and expenses, like mortgages and school loans, that would become extremely burdensome if the breadwinner of the family happened to die unexpectedly. Twenty years is typically long enough for the family to substantially pay down these debts and reduce the potential risk of someone else having to foot the bill should something happen. Take a look at the average rates by Rate Class below:

Average Cost of Life Insurance (2016) insurance

Looking for a longer term life insurance policy? Thirty year term policies will provide you more flexibility but come at a much higher price. However, one of the advantages to a longer policy, such as a 30 year term, is that your premiums remain unchanged even if your health changes over the time period. So if you’re underwritten as a healthy 25 year old and find yourself overweight and out of shape at 50, fear not! Your rates will have been locked in based on your physical health when you purchased the policy. You can see below how much pricier 30 year policies are than your shorter term policy options:

Average Cost of Life Insurance (2016) insurance

The life insurance market has grown by around 30% over the last ten years. Interestingly, the market grew about 28% between 2003 and 2008 before shrinking after the recession in ’08-’09. Since then it’s grown steadily and just surpassed it’s 2008 market size in 2012. Check out our graph below to see how the market has fluctuated in the last decade.

Average Cost of Life Insurance (2016) insurance 

Data from this study was sourced from TIAA-CREF. Average life insurance figures were calculated by looking at four policy amounts ($100k, $250k, $500k, and $1 million) across four Rate Classes. The results were averaged to give us the number in the first table. Here’s the breakdown concerning rate classes:

Preferred Plus policies assume no tobacco use in 5 years, no serious medical issues, cholesterol levels below 210, and blood pressure that doesn’t exceed 135/85.

Preferred policies assume no tobacco use in 3 years, above average health, no serious medical issues, cholesterol levels below 250, 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, cholesterol below 300.

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