Affordable Life Insurance Protection for Your Family

Term Life Insurance Pricing

Learn About Pricing on Term Life Insurance

How Much Will Term Life Insurance Cost?

The cost of a life insurance plan is unique to each individual and depends on the type of life insurance policy you choose, the amount of coverage you need, and personal factors such as your age and overall health.

The younger and healthier you are, the lower your insurance premium will be.

For example, a healthy 35 year-old man who buys 20-year level term life insurance policy, which has a fixed annual premium, might pay $440 a year to purchase a $500,000 death benefit.

While a healthy 50-year old man who buys the same life insurance policy might pay $1,350 per year. However, if he waits until he’s 65, the policy may cost around $7,200 per year.

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Let’s review how pricing is determined for your term life coverage.

Basically, there are a few key components that determine how much you pay for a term life insurance policy, including:

  • The amount of life insurance coverage
  • The type of term life insurance policy
  • The duration of your term for coverage
  • Your age and gender
  • Your health
  • Your personal risk factors


How Term Life Insurance Pricing Works

There are several factors that will affect your pricing for a term life policy.



All things being equal, rates on term life are lower for females compared to males.

This is due to the fact that women (on average) live longer lives than men. The longer your life expectancy the lower your rate for life insurance.

For example, 2011 life expectancy at birth (Statistics form the Center for Disease Control) indicate men live to 76.3 years on average compared to women who live to 81.1 years on average.



The cost of life insurance increases with your age since your risk of death is higher as you get older.

Life insurance rates increase gradually in your 20’s and 30’s. There aren’t any big jumps in premiums until you hit your 40’s. From then, they can increase quite a bit from one year to the next.


Term – Duration of Your Life Insurance Policy

Term life insurance comes in terms of 10, 15, 20, 25 and 30 years.

The term is how long the policy will last. Most term life policies come with a rate guarantee that matches the term.

For example, buy a policy with a 10-year term at $500 per year and you get 10 years of coverage at the $500 per year rate. The rate stays the same for the entire term.

That’s why longer-term life insurance policies cost more. As you get older and your health changes, the life insurance company’s risk also increases.

The likelihood of incurring a death claim on your term policy is greater the longer the coverage is "In Force". In addition, since your term life rate is locked-in for the entire duration of your policy, the insurance company cannot pass along increased claims or operating costs in the form of higher premiums.


Amount of Life Insurance Coverage

The higher the death benefit, the higher the cost of your policy. 

Life insurance is priced by tiers or rate bands.

Smaller policies fall into lower bands, which have a higher unit cost (per $1,000 of coverage).

Larger life insurance policies, although they cost more overall, actually have a lower cost per $1,000.

Basically, rates on life insurance per $1,000 of coverage vary by rate band and there are several bands.

So rates may vary for policy amounts of $100K to $249K, $250K to $499K, $500K to $1M, and $1M and up.


Premium Payment Mode

The premium mode is the frequency in which you pay your life insurance premiums to the insurance carrier.

The available modes of premium payment in order of increasing cost are:

  • Annual
  • Semi-Annual
  • Quarterly
  • Monthly 

The more frequent your insurance premium payments the higher your cost because the insurance company incurs higher administrative costs to bill you and process your payments several times a year instead of just once.

In addition, the insurance company places your premiums in investments accounts, earning interest on those funds. The longer they have to wait for your premiums, the less money they make in interest. So they reduce the risk by charging you a little more for paying installments.

The average cost per $1,000 of life insurance coverage decreases the larger the life insurance policy as you get into higher bands of coverage.


Insurance Company

Different life insurance carriers charge different rates for their life insurance plans. Some insurers have higher operating costs or spend more on marketing and advertising.

Other insurers may pay out fewer claims because they have better underwriting of the applicants they accept to insure.

However, competition in the term life marketplace is extremely competitive, which helps keep insurance costs reasonable and comparable from insurer to insurer.

Another factor for pricing differences is term life companies target specific niches of customers.

For example, one insurer may target younger individuals applying for large policies. Whereas, another life insurer target applicants in excellent health.


Rating Class

The rating class you are assigned to after underwriting has possibly the biggest impact on your cost. It’s also one pricing variable, aside from gender and age, you may have little control over.

Rating classes are risk categories that life insurance carriers place you in based on the risk you represent. The better the class, the less you’ll pay, and vice versa.

If you take care of your health, eat well and maintain a healthy weight, you might be rewarded with a Preferred rating class or even better.

Have a history of speeding tickets and reckless driving?

You could find yourself in a Standard class or worse.

Rating classes vary by company, but all insurers use the same basic approach:

Preferred is low risk, which is the least expensive, standard is average risk and average cost, and substandard is high risk and the most expensive life insurance coverage. 

That covers the seven factors that influence how much you’ll pay for your term life insurance policy.

So, here are the important points from this article:

Start your term life insurance policy sooner rather than later (age), buy only what you need (amount of coverage and term), compare pricing (company) and get healthy (rating class) and you’ll be on your way to getting affordable life insurance coverage.


How can you save money on term life insurance?

There are several ways save on life insurance coverage, including:

  • Shop and Compare Rates – Compare pricing from several insurers.
  • Buy The Right Amount of Life insurance – Use a life insurance calculator to help you determine how much life insurance you need so you don’t pay for more coverage than you really need.
  • Get Healthy – Lower your cholesterol, lose weight, exercise regularly and eat healthier.
  • Drive Safely – Improve your driving record.
  • Pay Premiums Annually – Choose the annual premium payment option.


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Term Life Insurance Pricing

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