The cost of life insurance is often overestimated, so don’t assume that you can’t afford a $500k life insurance policy without first getting life insurance quotes. This type of insurance policy may provide enough coverage to take care of your family and expenses like mortgage and kid’s college costs if you die unexpectedly.
Life insurance companies determine rates based on the insured’s age, gender, health profile, lifestyle, and other factors. Policy details, including term length and coverage amount, also affect premiums.
For instance, the average cost of a $500k 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 the factors that insurance companies consider when evaluating life insurance rates can help you find the most suitable policy for your financial circumstances and coverage needs.
What is life insurance?
Life insurance is a contract between you and an insurance company. In exchange for your premium payments, the life insurance company will pay a lump sum known as a death benefit to your beneficiaries after your death, as long as your policy is in force. If you have permanent life insurance, there may be a cash value component, too.
Financial protection and peace of mind are at the forefront of life insurance. The best life insurance companies offer coverage options that help you ensure your loved ones will be financially taken care of if you die. Knowing your family will not face financial hardship when you’re gone provides peace of mind.
Life insurance beneficiaries can use the money paid out by a policy for whatever purpose they choose. Often this includes:
- Paying for living expenses that were previously covered by the insured person’s income.
- Paying off credit card bills, medical bills, mortgages or car loan balances.
- Paying for funeral and final expense costs.
- Funding children’s college tuition and expenses.
Having the safety net of life insurance can ensure that your family can stay in their home and pay for their wants and needs.
In addition, many life insurance policies include living benefits. This feature allows you to take money from your own death benefit while you’re still living, but only in specific cases outlined in the policy. These can include cases where:
- You’re diagnosed with a terminal illness.
- You develop a chronic or critical illness.
You can use money from living benefits to pay for anything you like, such as medical bills not covered by health insurance or mortgage payments. When comparing life insurance vs. health insurance there are no similarities, but living benefits can pay health care costs.
How does life insurance work?
Life insurance works by providing your beneficiaries with a death benefit payout if you die, but only if your policy is in force when you pass away—meaning you have paid the required premiums while you’re alive. The death benefit can be used for any purpose your beneficiaries choose.
Before you enter into a life insurance contract, the life insurance company will determine your required premiums. There are several factors that affect life insurance quotes, including:
- Age
- Gender
- Health and medical history
- Coverage amount you choose
- Type of life insurance (such as term life vs. whole life)
The younger and healthier you are, the better your quotes will be. Comparing life insurance quotes with several reputable companies is a great way to start finding the best coverage for a good price.
There are two primary types of life insurance: term and permanent life:
- Permanent life insurance — such as whole life insurance or universal life insurance — can provide lifetime coverage. Most types of permanent life insurance include the ability to accumulate cash value which can be accessed while you’re still living.
- Term life insurance provides protection for a certain period. Term life is usually the cheapest life insurance option and it has no cash value.
Do I need a $500k life insurance policy?
Life insurance is designed to protect your spouse and children in the event of your premature death. In most cases, income replacement is the most significant reason for having $500k term life insurance.
The idea behind income replacement is to buy an amount of life insurance that would provide an income similar to if you were alive when you have passed away. Insurance agents typically recommend buying life insurance covering 7 – 10 times your annual salary.
Surprisingly, according to a Life Insurance Gap survey by New York Life, many families feel they should be covered for even more than the “rule of thumb” amount.
When you add up all of your current debts, your family’s regular living expenses, and future financial obligations, you might find that you actually need a $500k life insurance policy.
How much does a $500k life insurance policy cost?
- The average cost for a 10-year, $500,000 term life policy is $200 a year.
- The average cost is around $275 a year for a 20-year term—if you buy life insurance in your 30s while in good health, including being a non-smoker.
Your own life insurance quotes will differ depending on your age, health and other factors affecting life insurance quotes. However, an analysis of average costs for $500,000 in life insurance gives you a basic idea of how much you can anticipate paying.
Average Cost of $500k life insurance by age and gender
Average annual costs for a 10-year, $500,000 term life insurance policy
| Age | Male | Female |
|---|---|---|
| 30 | $216 | $180 |
| 35 | $216 | $192 |
| 40 | $276 | $264 |
| 45 | $372 | $312 |
| 50 | $564 | $432 |
| 55 | $888 | $648 |
| 60 | $1,392 | $948 |
Average annual costs for a 15-year, $500,000 term life insurance policy
| Age | Male | Female |
|---|---|---|
| 30 | $240 | $216 |
| 35 | $252 | $240 |
| 40 | $348 | $300 |
| 45 | $468 | $372 |
| 50 | $708 | $528 |
| 55 | $1,152 | $768 |
| 60 | $1,824 | $1,260 |
Average annual costs for a 20-year, $500,000 term life insurance policy
| Age | Male | Female |
|---|---|---|
| 30 | $300 | $252 |
| 35 | $312 | $264 |
| 40 | $408 | $336 |
| 45 | $612 | $468 |
| 50 | $936 | $696 |
| 55 | $1,500 | $1,068 |
| 60 | $2,520 | $1,788 |
Average annual costs for a 30-year, $500,000 term life insurance policy
| Age | Male | Female |
|---|---|---|
| 30 | $444 | $336 |
| 35 | $480 | $384 |
| 40 | $684 | $528 |
| 45 | $1,044 | $768 |
| 50 | $1,680 | $1,200 |
| 55 | $3,084 | $2,160 |
| 60 | N/A | N/A |
How age affects $500k life insurance cost
Age is one important factor in the cost of life insurance. Life insurance quotes will go up each year as you get older. Also, you risk developing a health condition that will cause higher quotes if you’re waiting to buy life insurance.
To get the best life insurance quotes, buy coverage as soon as the need arises.
Analysis of $500k term life insurance costs shows that you get substantial savings if you buy coverage while in your 30s. Waiting until your 50s or 60s to purchase a 20-year term life policy results in paying considerably more than if you buy coverage at a younger age:
- If you hold out until age 40 to buy a 20-term $500,000 life insurance policy instead of buying at age 30, quotes go up 36% for males and 33% for females.
- If you wait until age 50, the costs increase 212% for males and 176% for females compared to a 30-year-old.
- Holding out until age 60 (instead of buying at age 30), the cost increases by 740% for males and 610% for females. For males, the annual rate is over $2,500 at age 60 (compared to $300 at age 30), and for females, nearly $1,800 compared to only around $250 at age 30.
How gender affects cost of $500k life insurance
Life insurance quotes show that gender is also a big deal for life insurance companies. Males typically don’t live as long as females, so men pay more for their policies. Analysis shows that males at every age will get higher quotes for $500,000 life insurance policies compared to females. The difference in costs fluctuates as they age.
For example, looking at a $500,000, 20-year term life insurance policy, here is how gender affects rates:
- At age 30, males pay 19% more than females, nearly $50 more annually.
- At age 40, males pay 21% more, which calculates to $72 more annually than females.
- At age 50, males pay 34% more than females, an extra $240 annually.
- At age 60, males pay 41% more, which comes in at $732 more annually than females.
$500k life insurance costs by term length
Buying a term life insurance policy with a longer level term period means you’ll pay more, but you lock in a rate longer. The level term period is the number of years you’ll lock in a steady annual rate, such as 10, 20 or 30 years.
When the level term period ends you can typically renew the policy every year, but you’ll likely face much higher rates with each renewal, and the cost may become unaffordable.
Buying the right term life insurance length up-front will save you money in the long run by locking in your costs for the level-term period.
Here we compare costs for various lengths of policies for a $500,000 life insurance for a 30-year-old male and female.
Average annual costs by term length for a $500,000 life insurance policy
| Term | Male age 30 | Female age 30 |
|---|---|---|
| 10-year term | $216 | $180 |
| 15-year term | $240 | $216 |
| 20-year term | $300 | $252 |
| 30-year term | $444 | $336 |
- Moving from a 10-year term to a 15-year term raises rates 11% for males and 20% for females.
- Upgrading from a 10-year term to a 20-year term raises rates 39% for males and 40% for males.
- Both genders can double the length of the term life policy (from 10 to 20 years) and not even pay 50% more for the policy.
- To triple the time from 10 years to 30 years, males pay 105% more and females pay 87% more.
$500k life insurance costs by coverage amount
Getting quotes for various life insurance payout amounts can help you decide if a $500,000 life insurance policy will fit your budget. Below is the average annual costs by coverage amount for 20-year term life insurance
| Life insurance coverage amount | Male age 30 | Female age 30 |
|---|---|---|
| $100,000 | $108 | $108 |
| $250,000 | $192 | $168 |
| $500,000 | $300 | $252 |
| $750,000 | $396 | $288 |
| $1 million | $480 | $348 |
| $2 Million | $876 | $624 |
- Moving up to a $750,000 policy from $500,000 costs 32% more for males and 14% for females.
- Increasing your coverage amount from $500,000 to $1 million doesn’t double your life insurance costs. It costs only 60% more for males and 38% for females to double the coverage.
- Moving way up from $500,000 to a $2 million policy gives you four times the death benefit but doesn’t quadruple the life insurance costs. Males pay 192% more and females 148% more.
Cost of a $500k 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 issues are the most common types of permanent life insurance.
Because such policies are guaranteed to pay beneficiaries provided premiums are up to date, they are 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 it 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.
Tips on buying $500,000 life insurance
When you’re looking at $500,000 life insurance costs, first make sure that $500,000 meets your life insurance needs.
Determine what debts and other obligations your family would have if they no longer had you around. Your review of finances should include credit card balances, car loans, your home’s mortgage and other financial obligations. Also decide if you want to provide additional life insurance money to cover lost income, college tuition and funeral expenses.
Once you know how much life insurance you need, think about how long the policy should last. Term life insurance is good for covering obligations that have a definitive end, such as the years until you retire. If you want coverage no matter how long you live, consider whole life insurance or universal life insurance. A financial advisor or life insurance agent can also help you pinpoint the best coverage amount and policy type.
A life insurance medical exam may be required for the application process. Life insurance companies often require an exam so that they can get a detailed picture of your health. No-exam life insurance policies are becoming more widely available, but if you aren’t in excellent health, you may not qualify.
Finally, check the financial strength ratings of the life insurance companies you are considering. Rating agencies such as AM Best and Standard and Poor’s analyze company financials and create financial strength ratings that indicate an insurer’s ability to pay its claims. Because life insurance may not pay out until decades after you buy it, a company’s financial strength is especially important.
Who Is $500k life insurance for?
A $500k life insurance policy is an excellent financial safety net for anyone who wants to ensure their loved ones’ financial security after they have passed on. This type of policy is especially suitable for single parents, self-employed individuals, and stay-at-home spouses.
Single parents
Single parents carry the full weight of financial responsibility for their children. From daily expenses like food and clothing to long-term costs like education, a single parent must cover it all. A $500k life insurance policy can provide the necessary financial support to the child or children if the parent were to pass away unexpectedly.
This money can be used for immediate expenses, future educational costs, and even to supplement day-to-day living expenses.
Self-employed individuals
Self-employed individuals often don’t have the same safety nets as those working for corporations. There are usually no company-provided life insurance or pension plans. A $500k insurance policy can provide the self-employed with peace of mind knowing that their business and personal obligations would be covered in case of their death.
The death benefit payout could help cover business debts, maintain the business during a transition period, or provide for the individual’s family.
Stay-at-home spouses
The value of a stay-at-home spouse’s contribution to the household often goes unappreciated until it’s too late. The cost of services such as childcare, housekeeping, transportation, and meal preparation can add up quickly if the stay-at-home spouse were to pass away unexpectedly.
A $500k life insurance policy can provide the necessary funds to cover these additional costs and ease the financial burden on the surviving spouse.
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