By: Mark Fitzpatrick moneygeek.com
Contributor: Drew Blackston, CRC®
The average cost of life insurance for a $500,000 term policy is $29 per month. This coverage offers more than just funeral expense relief; it can also cover mortgage payments, educational costs and daily living expenses for years. While many insurers offer this policy, costs and benefits can vary. MoneyGeek broke down the different kinds of life insurance available in the market and the factors that affect their cost.
Full Article: https://www.moneygeek.com/insurance/life/rates/500-thousand/#expert=drew-blackston
How Much Is a $500,000 Life Insurance Policy?
Life insurance companies determine premiums based on the insured’s age, gender, health profile, lifestyle and other factors. Policy details, including term length and coverage amount, also affect life insurance costs. For instance, the average cost of a $500,000 life insurance policy with a 10-year term for a 40-year-old with excellent health is $29 per month. The average monthly premium for a 20-year term for the same individual is approximately $44. Understanding factors insurance companies consider when evaluating life insurance rates can help you find the most suitable policy for your financial circumstances and coverage needs.
Average Cost of a $500,000 Term Life Insurance Policy by Term Length
The term length of your life insurance is the number of years the insurance company will cover you. If you die within that period, the insurer will pay a death benefit to your beneficiary. Companies typically offer term lengths ranging from 10 to 30 years.
Your policy’s term length will affect your life insurance rates. Shorter terms, like a 10-year life insurance plan, will have lower rates. Choosing a longer term, like a 20-year term, will result in higher premiums. The insurer agrees to a longer coverage duration. The likelihood of a claim also increases.
Average Cost of a $500,000 Term Life Insurance Cost by Age
Age is the most critical factor affecting life insurance’s cost since insurance companies consider it the most significant risk determinant. People typically buy life insurance in their 40s, but purchasing a policy at a younger age to lock in a lower premium is generally better.
On average, a 10-year term life insurance policy costs $20 per month for a 30-year-old person, while a 50-year-old buying the same plan would pay $65 per month.
In addition, a longer-term length also makes life insurance more expensive. A 30-year-old person buying a 10-year term life insurance policy would pay $20 per month on average, but they’d have to pay $28 per month for a 20-year policy.
Average Cost of $500,000 Term Life Insurance Cost if You Smoke or Are in Poor Health
Insurance companies consider health an essential underwriting factor when pricing their policies. Generally, a person with poor health is riskier to insure because they have a higher chance of dying early.
Because smoking may lead to health problems and early death, it’s much riskier for insurers to provide life insurance for smokers. A person’s lifestyle and health profile also affect their life insurance rates.
On average, a 20-year term life insurance policy costs $44 monthly for a healthy non-smoker adult. The average cost of the same policy for a smoker is $102, while a person with poor health may have to pay $53 monthly.
Cost of a $500,000 Permanent Life Insurance Policy
Permanent life insurance policies don’t expire, but they can cost up to 20 times more than term life insurance policies on average. Whole life, universal life and guaranteed issue are the most common types of permanent life insurance.
Because such policies are guaranteed to pay beneficiaries provided premiums are up to date, the price for life insurance with permanent coverage tends to be more expensive than term life insurance.
People buy permanent life insurance to provide lifetime financial protection for their loved ones and supplement their retirement assets. Whole life insurance offers death benefit coverage and savings for the policyholder’s entire life.
Similarly, universal life insurance grants death benefit coverage but is riskier. With this type of insurance, you can customize your coverage amount, monthly premiums and how your savings will be invested based on your preference or financial situation.
Meanwhile, a guaranteed issue policy is a type of permanent life insurance that doesn’t require a medical exam designed for people with severe health conditions.
$500,000 Life Insurance With No Medical Exam
Instant life insurance is an affordable type of life insurance that doesn’t require medical examinations. Applying for a policy is convenient, as you can complete the process online and receive an immediate response from the insurer, which uses an accelerated underwriting process.
It’s also relatively cheap compared to similar no-exam policies — an average $500,000 instant life insurance policy costs about the same as a traditional one.
To apply, visit an insurance company’s website and fill out personal, contact, health and lifestyle information. The insurer will then collect your health and lifestyle data, including your prescription, driving and medical records. An algorithm will calculate your risk of dying early, and within minutes, the company can either approve, decline or refer your application to an underwriter.
Unlike a guaranteed or a simplified-issue policy (both of which do not require medical exams), an instant life insurance policy doesn’t require a two-year waiting period for the payout of death benefits to beneficiaries. It’s also often a more affordable option.
If want to get life insurance with a $500,000 coverage limit, instant life insurance is one of the most feasible options. Remember that instant life insurance is only available to certain age groups and people who fit into specific health parameters.
Frequently Asked Questions About $500,000 Life Insurance
We answered some frequently asked questions about $500,000 life insurance and life insurance pricing to help you decide if these policies are right for you.
How much does a $500,000 term life insurance policy cost?
Several factors, such as your age, health profile and policy details, affect how much a life insurance costs. On average, a 40-year-old with excellent health buying a $500,000 coverage will pay $29 a month for a 10-year term life insurance policy and $44 a month for a 20-year term.
How does a $500,000 life insurance policy work?
Life insurance is a contract that pays your beneficiary or beneficiaries a death benefit if you die, provided that your insurance premium payments are up-to-date. If your coverage amount is $500,000, your policy will pay your beneficiary in a lump sum, installment or retained assets.
Is a $500,000 term life insurance policy enough for me?
Whether or not a coverage amount is enough for you depends on your finances and family situation. Consider your unpaid debts, likely funeral costs and your family’s current and future expenses. As a rule of thumb, your coverage amount should be 10 to 12 times your annual salary, but the ideal amount may differ based on your circumstances.
Do companies offer $500,000 life insurance policies with no medical exam?
Yes, you can get $500,000 in life insurance coverage without undergoing a medical exam by purchasing guaranteed issue, simplified issue or instant life insurance. However, such policies can be more expensive or have limited availability than traditional life insurance.
Can you explain how a $500,000 life insurance policy works and who it is best suited for?
A $500,000 life insurance policy pays out a death benefit of $500,000 to your beneficiaries upon your passing. This benefit can be used to cover various expenses, such as:
- Replacing your income: This helps your family maintain their lifestyle.
- Paying off debts: This ensures financial obligations don’t burden your loved ones.
- Funding future needs: This could be your children’s education or a surviving spouse’s retirement.
This type of policy is ideal for people with:
- Dependents: Spouses, children or parents who rely on your income.
- Debts: Mortgages, student loans or other financial commitments.
- Desire to leave a legacy: Funding future needs of loved ones.
How can individuals assess whether a $500,000 life insurance coverage is adequate for their needs?
Determining if $500,000 is enough coverage depends on your individual circumstances. Here are some factors to consider:
- Income: A good rule of thumb is to have coverage of ten times your annual income.
- Debts: Factor in outstanding debts like mortgages or student loans.
- Dependents: Consider the number of dependents and their future needs (e.g., college education).
- Lifestyle: Evaluate your family’s desired standard of living after you’re gone.
Beyond the Numbers: While calculations help, consider these additional points:
- Future earning potential: A higher coverage amount might be wise if you’re young and expect your income to grow.
- Other assets: Do you have life savings or investments that can supplement the death benefit?
It’s a conversation. Discuss your needs with a financial advisor. They can help you assess your situation and determine the appropriate life insurance coverage amount.