How Much Does Whole Life Insurance Cost? | Factors & Examples
If you’re looking for a life insurance policy that provides coverage for your entire life and also builds cash value over time, you might be interested in whole life insurance. Whole life insurance is a type of permanent life insurance that guarantees a death benefit to your beneficiaries and also accumulates cash value that you can access while you’re alive. Whole life insurance also offers some tax advantages, such as tax-deferred growth of cash value and tax-free death benefit.
However, whole life insurance is not cheap. In fact, it’s one of the most expensive types of life insurance you can buy. The cost of whole life insurance depends on several factors, such as your age, gender, health, lifestyle, coverage amount, and any additional riders or features you add to your policy. In this article, we’ll break down these factors and provide some examples of average premiums for whole life insurance.
Factors that Affect Whole Life Insurance Rates
When you apply for whole life insurance, the insurer will assess your risk profile based on various factors. These factors help the insurer determine how likely you are to die during the policy term and how much they need to charge you to cover their expenses and make a profit. Here are some of the main factors that affect the cost of whole life insurance:
- Age. This is one of the most important factors that affect your whole life insurance rates. The older you are, the higher your risk of dying and the more expensive your premiums will be. That’s why it’s advisable to buy whole life insurance when you’re young and healthy, as you can lock in lower rates for life.
- Gender. According to the latest data from the Centers for Disease Control and Prevention, men have a lower life expectancy than women in the United States . For that reason, men often pay more for whole life insurance than women, as there’s a higher chance that the insurer will have to pay out the policy sooner.
- Health and family medical history. The insurer will also evaluate your current health condition and your family medical history to determine your risk of developing or dying from certain diseases or conditions. You’ll typically have to undergo a medical exam and answer some health-related questions on your application. If you have any pre-existing conditions or a family history of serious illnesses, such as cancer, heart disease, or diabetes, you’ll likely pay higher premiums for whole life insurance.
- Lifestyle and occupation. Your lifestyle and occupation can also affect your whole life insurance rates. If you work in a hazardous job or engage in risky hobbies or activities, such as skydiving, scuba diving, or racing, you’ll be considered a higher risk by the insurer and charged more for your policy. On the other hand, if you have a healthy lifestyle and avoid smoking, drinking excessively, or using drugs, you’ll qualify for lower rates.
- Smoking status. Smoking is one of the worst habits you can have when it comes to your health and your whole life insurance rates. Smoking is linked to many health problems, such as lung cancer, respiratory disease, stroke, and heart attack. As a result, smokers pay much more for whole life insurance than non-smokers. Depending on the insurer, smokers can pay up to three times more than non-smokers for the same coverage amount .
- Driving record. Your driving record can also influence your whole life insurance rates. If you have a history of traffic violations or accidents, such as speeding tickets, DUIs, or reckless driving charges, you’ll be seen as a higher risk by the insurer and pay more for your policy. Conversely, if you have a clean driving record and no claims history, you’ll be rewarded with lower rates.
- Coverage amount. The coverage amount is the amount of money that your beneficiaries will receive when you die. The higher the coverage amount, the higher the premiums will be. This is because the insurer will have to pay out more money in case of your death and will need to charge you more to cover their risk.
- Any additional riders. Riders are optional features that you can add to your whole life insurance policy to customize it to your needs and preferences. Some common riders include waiver of premium (which waives your premiums if you become disabled), accelerated death benefit (which allows you to access part of your death benefit if you’re diagnosed with a terminal illness), guaranteed insurability (which allows you to increase your coverage amount without having to undergo another medical exam), paid-up additions (which allow you to buy extra coverage with your dividends), and policy dividends (which are payments that some insurers make to their policyholders based on their financial performance). Riders can enhance the value and flexibility of your policy, but they also come at a cost. Depending on the rider and the insurer, you may have to pay an extra fee or a higher premium to add a rider to your policy.
Average Cost of Whole Life Insurance by Age and Gender
One of the easiest ways to compare the cost of whole life insurance is by looking at the average premiums for different age and gender groups. The table below shows the average monthly premiums for a $500,000 whole life insurance policy for healthy applicants of various ages and genders, based on data from Quotacy .
As you can see, age and gender have a significant impact on the cost of whole life insurance. Younger and female applicants pay much less than older and male applicants for the same coverage amount. For example, a 30-year-old female pays $293 per month for a $500,000 policy, while a 60-year-old male pays $1,431 per month for the same policy. That’s a difference of $1,138 per month or $13,656 per year.
The reason why age and gender affect the cost of whole life insurance is simple: younger and female applicants are expected to live longer than older and male applicants, which means that the insurer will have to pay out the death benefit later and collect more premiums in the meantime. Therefore, the insurer can afford to charge them lower rates.
This also means that buying whole life insurance at a younger age can save you a lot of money in the long run. For example, if you buy a $500,000 policy at age 30 and pay $347 per month until age 80, you’ll pay a total of $208,200 in premiums. However, if you buy the same policy at age 50 and pay $847 per month until age 80, you’ll pay a total of $302,760 in premiums. That’s a difference of $94,560 over 30 years.
Average Cost of Whole Life Insurance by Coverage Amount
Another way to compare the cost of whole life insurance is by looking at the average premiums for different coverage amounts. The table below shows the average monthly premiums for various coverage amounts for a 40-year-old male applicant who is in good health, based on data from Policygenius .
As you can see, the coverage amount has a direct impact on the cost of whole life insurance. The higher the coverage amount, the higher the premiums will be. This is because the insurer will have to pay out more money in case of your death and will need to charge you more to cover their risk.
However, this doesn’t mean that you should buy the lowest coverage amount possible to save money. You should buy a coverage amount that meets your needs and goals and provides adequate financial protection for your loved ones. To determine how much coverage you need, you should consider factors such as your income, expenses, debts, assets, liabilities, dependents, and future plans.
For example, if you earn $50,000 per year and want to replace your income for 20 years after your death, you’ll need at least $1 million in coverage. However, if you also have a mortgage of $300,000 and want to pay it off with your death benefit, you’ll need at least $1.3 million in coverage. On the other hand, if you have no dependents or debts and only want to cover your final expenses and leave some money for charity, you may only need $100,000 in coverage.
Average Cost of Whole Life Insurance by Riders and Features
The last way to compare the cost of whole life insurance is by looking at the average premiums for different riders and features that can be added to your policy. As we mentioned earlier, riders are optional features that can enhance the value and flexibility of your policy. However, they also come at a cost. Depending on the rider and the insurer, you may have to pay an extra fee or a higher premium to add a rider to your policy.
Here are some examples of how much some common riders and features can affect the cost of whole life insurance:
- Waiver of premium. This rider waives your premiums if you become totally disabled and unable to work for a certain period of time (usually six months or more). The cost of this rider varies by insurer, but it typically ranges from 0.2% to 0.6% of your base premium.
- Accelerated death benefit. This rider allows you to access a portion of your death benefit (usually up to 50% or a certain dollar amount) if you’re diagnosed with a terminal illness and have a life expectancy of 12 months or less. The cost of this rider varies by insurer, but it’s usually free or very low (around $25 per year). However, you may have to pay an administrative fee or interest when you use this rider, and your death benefit will be reduced by the amount you receive.
- Guaranteed insurability. This rider allows you to increase your coverage amount at certain intervals (usually every three or five years) or life events (such as marriage, birth of a child, or mortgage) without having to undergo another medical exam or provide proof of insurability. The cost of this rider varies by insurer, but it typically ranges from 1% to 6% of your base premium.
- Paid-up additions. This feature allows you to buy extra coverage with your dividends or additional payments. The cost of this feature depends on how much extra coverage you buy and when you buy it, but it generally increases your premiums and cash value proportionally.
- Policy dividends. This feature allows you to receive payments from your insurer based on their financial performance and experience. The amount and frequency of dividends are not guaranteed and vary by insurer, but they can be used to reduce your premiums, buy paid-up additions, accumulate interest, or receive cash. The cost of this feature is usually included in your base premium.
As you can see, riders and features can affect the cost of whole life insurance in different ways. Some riders and features may increase your premiums, while others may reduce them or provide other benefits. Therefore, you should carefully weigh the pros and cons of each rider and feature and decide whether they’re worth adding to your policy.
Conclusion
Whole life insurance is a type of permanent life insurance that provides lifetime coverage and cash value accumulation. However, it’s also one of the most expensive types of life insurance you can buy. The cost of whole life insurance depends on several factors, such as your age, gender, health, lifestyle, coverage amount, and any additional riders or features you add to your policy.
To get an idea of how much whole life insurance costs, you can look at the average premiums for different age and gender groups, coverage amounts, and riders and features. However, these are only general estimates and may not reflect your specific situation and needs. The best way to find out how much whole life insurance costs for you is to compare quotes from different insurers and work with a licensed agent who can help you find the best policy for your needs and budget.
If you’re interested in buying whole life insurance or learning more about it, don’t hesitate to contact us today. We can help you get a free quote from top-rated insurers and answer any questions you may have about whole life insurance. Don’t wait any longer - get started now and secure your financial future with whole life insurance.
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